Johannesburg – Debt issued by Mozambique’s state-run tuna-fishing company Ematum may net a ratings downgrade.
The treat for downgrade came after the agency Fitch said the state’s offer to exchange outstanding liabilities for a fixed rate sovereign note could represent a default.
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the tuna bond, the original 850 million dollars bond was issued in 2013.
It was presented as funding for “tuna fishing and related infrastructure” although it quickly became apparent that much of the cash was for maritime surveillance and security.
Fitch said late on Friday it was placing Mozambique’s Long-term foreign and local currency Issuer Default Ratings (IDRs) of ‘B’ on Rating Watch Negative (RWN) .
It was rated so because of concerns about the bond.
Such a move would be a fresh blow to the deteriorating investor image of Mozambique.
The country is one of the world’s poorest countries, which sits on vast untapped reserves of natural gas but has been hard hit by the slump in global commodity prices.
Mozambique this week asked holders of bonds in Ematum to swap the debt for new U.S. dollar-denominated 2023 bonds to smooth its debt maturity profile.
The Mozambique government is offering to exchange 2020 maturing bonds, with 697 million dollars outstanding that paid a 6.305 percent coupon, into a new fixed rate sovereign note due 2023.
“In Fitch’s view, the offer could constitute a Distressed Debt Exchange (DDE) under the agency’s criteria, which we would consider a default event,” Fitch said in a statement.
“If Fitch deems the exchange offer to be a DDE, the agency would downgrade Mozambique’s Long-term foreign currency Issuer Default Ratings to ‘C’ from ‘B.
This indicates that default is highly likely in the near term,” it said. (Reuters/NAN)