Africa Economy Finance Government Mozambique

Bloomberg: Mozambique Readies Eurobond as Tuna Investors Agree to Swap

Mozambique will issue its first sovereign bond on April 6 after holders of $697 million of notes issued by a state tuna-fishing company agreed to a swap offer from the government.

While Standard & Poor’s downgraded the southeast African country to selective default shortly after the announcement on Friday, that won’t stop the deal from going through, according to New York-based AllianceBernstein LP, the second-biggest holder of the tuna debt.

The new $726.5 million bond will mature in January 2023 and replace state-guaranteed debt sold by Empresa Mocambicana de Atum SA, or Ematum, in 2013 with a 6.305 percent coupon that was due in September 2020. Holders of 98.3 percent of Ematum’s bonds were present at a vote in London on Friday, with 86.5 percent of those accepting the government’s proposal, Credit Suisse Group AG and VTB Capital Plc, which are managing the swap, said in an e-mailed statement.

The price of the new bond will be 80 cents on the dollar and the coupon 10.5 percent, equating to a yield of about 14.4 percent. At that level, it will be the highest-yielding sovereign Eurobond in Africa, with similar maturity debt from Ghana yielding 12.3 percent on Friday.

Tantamount to Default

Mozambique has obtained waivers from lenders of “at least” $707 million of debt “potentially prepayable” after Standard & Poor’s downgraded the nation to CC, 10 levels below investment grade, from B- on March 15, the statement from the banks shows.

S&P cut Mozambique again after Friday’s announcement because “even though investors may not contest the offer, we consider the exchange offer to be tantamount to default,” the ratings company said in an e-mailed statement.

“It was always seen as a possibility, but it has no consequence on the completion of the transaction,” Marco Santamaria, a money manager at AllianceBernstein, said in an e-mailed response to questions. Only Denmark’s Danske Bank A/S holds more Ematum bonds than his firm, according to data compiled by Bloomberg. “I would expect S&P to remove the SD rating upon the issuance of the new bonds and the retirement of the old ones.”

Fitch Ratings Ltd., which rates Mozambique B, five steps into junk, said on March 22 that the offer didn’t constitute a distressed exchange.

Source: Bloomberg

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