Algeria, August 5, 2018

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Mozambique bondholders seek payment from gas in restructuring

A group of Mozambique bondholders proposed the government pay them portions of future natural gas revenue as part of a restructuring of the nation’s Eurobonds.

The so-called Global Group of Mozambique’s Bondholders formally made the proposal to the southeast African nation, which also includes cash-flow relief until 2023, said the people who asked not to be identified because the plan hasn’t been announced publicly.

The people declined to say when the proposal sets as the extended date for repayment of the principal amount, or for how many years the bondholders would receive a portion of gas royalties and taxes. The government forecasts $49 billion in revenues over three decades from the first two projects, which will start producing gas from 2022 and 2023.

Mozambique two years ago, announced it was seeking to restructure external loans worth about $2 billion and has missed payments on all of them since, including the Eurobond. The restructuring proposal came after the government owned up to two other loans taken out by two state-owned companies for maritime security and ship-repair projects totalling more than $1 billion, which were previously undisclosed. That resulted in the International Monetary Fund freezing funding for the government, while a group of 14 donors also halted direct budget support.

The proposal says nothing about the other two loans, the people said. This was previously a sticking point as the GGMB wanted favourable treatment that recognised they already restructured in 2016, when investors agreed to swap their loan to a state-owned tuna-fishing company into the Eurobond.

A spokesman at Mozambique’s Ministry of Economy and Finance did not immediately respond to an emailed request for comment. Lazard Frères SAS, the nation’s financial advisers for the restructuring, confirmed the ministry received a restructuring proposal from the group.

“The ministry is currently analysing the proposal with the support of its financial and legal advisers, Lazard Frères and White & Case, to assess if it achieves the objectives set out by the ministry in the March meeting with Mozambique’s commercial creditors in London,” it said by email. “For any restructuring proposal to be acceptable, it must recognise and address the government’s fiscal and developmental constraints and debt sustainability objectives.”

Mozambique had in its March restructuring proposal said it wanted to write off 50 per cent of the missed debt payments, while extending maturities of the debts and lowering interest payments until after it starts receiving gas revenue after 2023. Companies including Anadarko Petroleum Corp. and Exxon Mobil Corp are planning mega-projects in the north of the country that will make Mozambique one of the biggest exporters of the fuel.

The GGMB has previously said it has the backing of holders of at least 80 per cent of Mozambique’s Eurobonds, including Franklin Templeton and New York-based hedge fund Greylock Capital Management.

cpifinancial



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