Zambia has reportedly reached an agreement in principle on debt restructuring terms with a creditor group holding its international bonds.
The Ministry of Finance is quoted by Reuters as saying the country had already reached an agreement in principle on debt restructuring terms with a creditor group holding its international bonds.
The agreement would see the three existing bonds restructured into two new amortizing bonds maturing in 2035 and 2053 respectively, under a “base case” scenario.
“Both bonds would mature in 2035 if Zambia’s economy performs better. Under both scenarios, the deal would translate into an 18 percent nominal haircut,” the ministry said.
Zambia was the first African country to default in the COVID-19 era, in late 2020, and its restructuring process suffered numerous delays.
It further stated that the international bondholders also complained they were left out of the process, which started with drawn-out negotiations with bilateral creditors including China.
According to Reuters, Zambia’s three international bonds rose sharply after the agreement, adding as much as 3.5 cents on the dollar, Tradeweb and MarketAxess data showed.
The 2024 and 2027 bonds were bid at or just under 60 cents in the dollar.
The proposed restructuring included a US$700 million write-off and US$2.5 billion in cash flow relief during the period of Zambia’s US$1.3 billion, 38-month Interntional Monetary Fund (IMF) programme, which was approved in September 2022.
In a separate statement, the Zambia External Bondholder Steering Committee welcomed the agreement, saying it would “restore full international capital markets access to Zambia and encourage long-term investment in the country.”
The deal allows for a better and quicker payout to bondholders in case the economy performs better than expected during an observation period running from January 2026 to December 2028.
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