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Zambia has agreed to restructure $3bn of its offshore bonds with the latest move coming after a three-year effort amid several delays and a debt default. The finance ministry said that the terms were compatible with the official creditor committee’s assessment of treatment on ‘comparability’. This comes after its November deal with bondholders was rejected by official creditors including China due to the treatment on ‘comparability’ being questioned. Zambia President Hakainde Hichilema said, “History has been made!”.
Bondholders would have to take a haircut of 21.6% of the nominal value of their bonds (including past interest). They would have to forgo about $840mn of their claims and provide cash flow relief of ~$2.5bn during the IMF program period. As compared to the previous rejected deal, bondholders would have taken a 16% cut. Investors can exchange their old bonds into two new government bonds — Bond A for $1.7bn and Bond B for $1.35bn. The bond exchange should be completed by June 2024.
Zambia’s dollar bonds were trading stable with its 8.97% 2027s at 74, yielding 18.6%.
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