Eurobonds deal milestone to trigger benefits
Published On March 26, 2024 » 1215 Views» By Times Reporter » Features
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•FLASHBACK….President Hichilema (second left) with his team meeting the Eurobond creditors in London, England in 2022.

By JAMES MUYANWA –
THE milestone attained by the Zambian government by reaching an agreement with its bondholders yesterday on the $3.5 billion Eurobonds will trigger many economic benefits.
The agreement on the restructuring of Zambia’s debts will address the apprehension which has characterised the economy due to the delay in addressing the issue of the debt left by the previous government administration.
According to the Zambia External Bondholder Steering Committee the agreement include the repayment of Zambia’s US$750 million Eurobond at 5.375 per cent which was due in 2022 another US$1 billion at 8.500 per cent which was due this year 2024 and US$1.250 billion at 8.970 per cent for 2027.
The agreement follows the Zambian government’s confirmation that its terms are compatible with the country’s official creditor committee’s comparability of treatment assessment and the International Monetary Fund’s programme parameters under the second review framework.
The move has cleared a key hurdle that’s delayed its three-year effort to escape debt default with implications for other nations seeking creditor deals.
According to international media the investors greeted the news of the agreement with the bondholder steering committee warmly.
For instance Zambia’s dollar Eurobond maturing 2027 extended earlier gains to advance two cents on the dollar to 74.576 cents as they digested the announcement.
That’s the biggest one day gain since February 26, lifting the price to its highest level since May 2022.
In some technical detail, the government through the ministry of Finance separately indicated that it had received confirmation that the terms of the Eurobond agreement were compatible with the official creditor committee’s assessment of comparability of treatment.
A previous November deal with Zambia’s Eurobond holders was rejected by official creditors including China because they didn’t accept they were being treated comparably, a key tenant of the Common Framework.
Zambia said that bondholders would forgo about $840 million of their claims, and provide cash flow relief of approximately $2.5 billion during the IMF programme period.
That translates to an haircut of 21.6 per cent of total nominal face value of the bonds, including past due interest. Under the previous deal that the official creditors rejected, bondholders would’ve taken a 16 per cent cut.
The bond exchange should be complete around end-May or early June, according to a person close to the committee of holders, who asked not to be named.
The deal also includes a “base case” and “upside case” affecting the financial structure of the agreement if it is triggered by the performance of the Zambian economy.

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