LONDON – A core group of Mozambique’s Eurobond creditors have made a restructuring proposal to the government, including extending maturities and adding instruments linked to future gas revenues, sources close to the negotiations told Reuters.
Mozambique admitted in 2016 to $1.4 billion of previously undisclosed loans, many of which went on upgrading maritime and military security. The disclosure prompted the International Monetary Fund and foreign donors to cut off support, triggering a currency collapse and leading to a debt default.
In March, the government outlined three scenarios to overhaul its debt burden but Eurobond creditors rejected them, baulking at a second writedown in as many years.
A counter proposal by the Global Group of Mozambique Bondholders (GGMB) was sent to the government on Wednesday, according to two sources.
The proposal envisages pushing out the “bullet” repayment on the 2023 bond, some reduction in the coupons, and an instrument to allow bondholders access to a share of future fiscal revenues from Mozambique’s vast gas resources.
“There is a substantial cash flow relief to 2023 … and that cash flow relief amounts to almost $1 billion to the maturity of the existing bonds,” one source told Reuters, speaking on condition of anonymity.
Another source added the new Eurobond issued under the proposal would be bigger in size to account for capitalisation of past due interest, which by now amounts to nearly $200 million or about 25 percent of the principal.
Meanwhile the instrument linked to gas-related revenues going to the government would only kick in once a certain threshold had been reached, with Maputo retaining at least 97 percent of the gas earnings, the source added.
Neither source would give further details on size, maturity or other details.
The defaulted Eurobond, which is due to mature in January 2023, has just under $727 million outstanding and last traded at 82.5 cents in the dollar, according to Reuters data.
Substantial offshore gas reserves were discovered off Mozambique more than a decade ago but progress in getting the infrastructure in place to tap them has been glacial.
The country’s Rovuma Basin boasts gas resources of around 180 trillion cubic feet, enough to underpin massive LNG export plants under development by Exxon Mobil and Anadarko Petroleum, with production expected to start in 2024.
The steering committee of the GGMB is made up of hedge funds Farallon Capital, Greylock Capital, Mangart Capital Advisors and Pharo Management as well as asset manager Franklin Templeton Investment Management Limited, according to GGMB’s advisors.
The steering committee members and other bondholders supporting its position represent over 80 percent of the Eurobonds.
Mozambique is being advised by Lazard. (Reuters)