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Bond Market News
Ethiopia Bondholders Reject 18% Haircut on Restructuring Terms
October 4, 2024
Investors holding Ethiopia’s defaulted $1bn dollar bonds have rejected the government’s proposed debt-restructuring terms, specifically regarding the 18% haircut on the principal. An ad hoc committee representing over 40% of the bondholders said that the proposal was “wholly inconsistent” with Ethiopia’s economic fundamentals and was unreasonable for negotiation. However, the Ethiopian government reiterated its offer during a call with bondholders, even after the committee had previously dismissed the idea of a haircut in August. Ethiopia, which defaulted on the debt in December 2023, secured a $3.4bn loan from the IMF in July and is now seeking to renegotiate its obligations to both, bondholders and bilateral creditors like China and France. Analysts suggest that the proposed haircut exceeds the relief required by the IMF’s debt sustainability analysis, thus indicating room for bondholders to negotiate better terms. Bondholders have shown concerns about “lack of transparency” in the restructuring process.
Ethiopia’s dollar bonds traded weaker by 0.3 points at 77.1 cents on the dollar.
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