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Maputo Confidential

Summary:
A ‘confidential’ presentation by Mozambique’s government to nervous bondholders in London on Tuesday that it is in “debt distress,” and that they should lawyer-up for a restructuring, turns out to have been… not quite so confidential: Click above for the full presentation, which was posted publicly on the ministry of finance’s website. The presentation notes that on every one of five indicators used by the IMF to test the level of debt and capacity to service debts (against GDP, exports and so on), Mozambique is highly distressed. It wants a loan from the IMF early next year though, so: Mozambique would welcome formation of one (or several) representative creditors’ committee(s) to engage in discussions with the Ministry of Economy and Finance and its advisors… Mozambique has

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A ‘confidential’ presentation by Mozambique’s government to nervous bondholders in London on Tuesday that it is in “debt distress,” and that they should lawyer-up for a restructuring, turns out to have been… not quite so confidential:

Maputo Confidential

Click above for the full presentation, which was posted publicly on the ministry of finance’s website.

The presentation notes that on every one of five indicators used by the IMF to test the level of debt and capacity to service debts (against GDP, exports and so on), Mozambique is highly distressed. It wants a loan from the IMF early next year though, so:

Mozambique would welcome formation of one (or several) representative creditors’ committee(s) to engage in discussions with the Ministry of Economy and Finance and its advisors…

Mozambique has appointed Lazard Frères (financial advisor) and White & Case LLP (legal advisor) as its exclusive advisors to support the debt solution process. Mozambique’s authorities, Lazard and White &Case remain at the disposal of Mozambique’s commercial creditors to discuss the content of this presentation and will be holding consultations regarding the optimal framework for ongoing engagement with Mozambique’s commercial creditors in the coming days…

The debt in question is Mozambique’s 2023 bond, which was itself issued only relatively recently following restructuring of the notorious government-guaranteed bonds of the state-owned tuna fishery, Ematum. That’s the one which took such an unusual interest in military hardware.

The 2023 bond has, accordingly, sold off in epic fashion. Its yield vaulted to about 20 per cent (having started on Tuesday at 15 per cent) as the presentation was made to creditors in London. That’s about 65 cents on the dollar in price terms — although we hear that stunned bondholders found it rather difficult to trade out of the bond on Tuesday…

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Joseph Cotterill
Joseph is the FT’s Southern Africa correspondent based in Johannesburg, after previous stints as private equity correspondent and on the Lex column. But he still writes for Alphaville, which he joined way back in March 2010 — right in the middle of the Greek bailout crisis. He has been very interested in all things credit and sovereign debt ever since…

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