Mozambique Eyes New Eurobond in Restructuring Pact With Greylock

(Bloomberg) -- Mozambique has finally struck a restructuring deal with Eurobond holders, almost two years after defaulting.

The southern African nation has agreed in principle with holders of 60 percent of its bonds, including New York-based hedge fund Greylock Capital Management LLC, a deal that will see them swap into a new $900 million Eurobond maturing in 2033 and another instrument linked to future gas revenues, the Ministry of Finance said in a statement Tuesday.

The government’s sole Eurobond, a $727 million deal maturing in 2023, rose to 85.3 cents on the dollar, the highest level this month, which equates to a yield of around 17.1 percent.

Here’s more detail:

• The ministry reached an agreement with four members of the so-called Global Group of Mozambique Bondholders: Greylock, Farallon Capital Europe, Mangart Capital Advisors, Pharo Management
• The deal is conditional on parliamentary approval and the parties finalizing the “detailed terms”
• The Finance Ministry expects to start an exchange offer early next year
• Both new instruments will be senior unsecured obligations of the government
• The Eurobond will have a 5.875 percent coupon; through 2023, 4 percent will be paid in cash and the rest will be “payable via capitalization”
  • The notes will amortize from September 2029 via five equal payments
  • The $900 million includes the outstanding principal and unpaid interest as of September this year
• The so-called “value recovery instrument” will be of “an amount equal to 5% of the prior year’s aggregate fiscal revenue derived by Mozambique from the Area 1 and Area 4 natural gas projects”
  • There will be a payment cap of $500 million and a final applicable fiscal year of 2033
  • The “precise payment dates and mechanism for calculating and verifying payment amounts to be determined in definitive documentation”

The ministry made no mention of the more than $1 billion of loans for state companies Mozambique Asset Management and ProIndicus that the government also wants to restructure. Both companies’ loans have state guarantees. The government wanted to deal with all debt holders together, but the Eurobond holders argued they should get preferential treatment because the legality of the guarantees was questionable.

To contact the reporter on this story: Paul Wallace in Lagos at pwallace25@bloomberg.net

To contact the editors responsible for this story: Dana El Baltaji at delbaltaji@bloomberg.net, Robert Brand, Alex Nicholson

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