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Zambia’s government reached an agreement in principle with a steering committee of holders of $3 billion of eurobonds to restructure the debt, three years after first defaulting on the loans. The price of the notes surged.
The accord was reached on the key commercial terms of a proposed overhaul of its 2022, 2024 and 2027 bonds, the Finance and National Planning Ministry said in a statement on Thursday.
The deal includes permanently waiving about $700 million in claims and offering about $2.5 billion in cash flow relief through reduced debt-servicing payments during the nation’s International Monetary Fund program period, it said.
“Today’s agreement with the steering committee brings us closer to the completion of Zambia’s debt restructuring, which will release significant resources for our developmental agenda,” Finance Minister Situmbeko Musokotwane said in the statement.
The steering committee holds about 18% of Zambia’s outstanding eurobonds, and represents an ad-hoc committee that owns more than 40% of the securities.
Zambia has been struggling to restructure billions of dollars in debt held by a broad range of creditors from state-owned Chinese lenders to hedge funds since becoming Africa’s first pandemic-era sovereign defaulter.
The bondholder deal — which the government expects to be finalized by year-end — marks the next major milestone, leaving other commercial lenders including Standard Chartered Plc to finalize their own deals.
The key terms of the deal-in-principle with the bondholder steering committee includes:
- The $3 billion in eurobonds that’s now grown to $3.82 billion including interest and penalties will be restructured into two new bonds: Bond A and Bond B
- Bond A will have a face value of $2 billion, with final maturity in 2035
- Coupon will be 5.75% until September 2031, rising to 8% thereafter
- Bond B will have a $1.14 billion face value, with final maturity in 2053
- Coupon will be 0.5%
The deal comes less than two weeks after Zambia, which defaulted on its debt in November 2020, agreed a memorandum of understanding to restructure its loans with official creditors.
That accord paved the way for the disbursement of another portion of a $1.3 billion IMF loan to the southern African nation.
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