africa Banking Economy Finance Mozambique

Mozambique nears debt-restructuring deal with Russia’s VTB, IMF Says

Mozambique reached an agreement in principle with Russia’s VTB Bank on the restructuring of a loan that forms part of the nation’s $2 billion hidden-debt scandal, according to the International Monetary Fund.

The southeast African nation has sought to restructure the loans since 2016, when the government admitted to the IMF it had contracted the bulk of them in secret, breaching an obligation to notify the Washington-based lender of any new credits. The U.S. Department of Justice and the Mozambican authorities are investigating the loans.

Talks between Mozambique and VTB on the lender’s $535 million loan to state-owned Mozambique Asset Management “are nearly finalized with an agreement in principle reached,” the fund said in an April 19 debt-sustainability analysis that’s yet to be made public and was obtained by Bloomberg. “The new restructuring terms would provide significant debt-service relief and staff assess that there is a good prospect of these discussions concluding as envisaged.”

Restructuring Agreement

Mozambique in November reached a restructuring agreement with the majority of holders of its $727 million of Eurobonds, which stemmed from the same $2 billion project as MAM. Under that deal, holders would get a new $900 million Eurobond maturing in 2033 as well as five percent of revenue from natural-gas projects companies including Exxon Mobil Corp. and Anadarko Petroleum Corp. are developing off Mozambique’s coast.

Neither Mozambique’s Finance Ministry nor its advisers at Lazard Freres SAS responded to emails seeking comment. The IMF declined to comment. VTB also declined to comment, but has previously said it expects to agree on similar restructuring terms to Eurobond-holders.

“It will be similar to the conditions proposed to the bondholders, though a little less aggressive,” VTB First Deputy Chief Executive Officer Yuri Soloviev told Bloomberg in November.

Mozambique has filed a case in London seeking to cancel a government guarantee for one of the three loans that comprise the $2 billion of debt, citing allegations of bribery and kickbacks in the contraction of the debt. Credit Suisse was the lead arranger for that $622 million loan to state-owned ProIndicus. The Swiss lender has denied any wrongdoing.

Striking restructuring deals for the MAM loan and Eurobond holders, while cancelling the ProIndicus debt, would mark a significant step in opening the way for Mozambique to re-enter global capital markets. Empresa Nacional de Hidrocarbonetos EP, the state-owned energy company, plans to raise billions of dollars in loans to pay for its share of financing the natural-gas projects being developed along Mozambique’s northern coastline.

Source: Bloomberg

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