Ethiopia has begun formal discussions with investors over the restructuring of its $1 billion international bond, a source familiar with the process told Reuters on Monday, confirming earlier reports.
The talks are being held in Paris, the source said, aligning with a Bloomberg report. An official from Ethiopia’s finance ministry confirmed that a government delegation had travelled to Paris but gave no further details.
“There were some meetings scheduled with bondholders,” the source said, adding that while a readout could follow later, a deal was not imminent.
Ethiopia’s central bank governor, Eyob Tekalign, did not immediately respond to requests for comment, and a representative of an ad hoc committee of bondholders also declined to comment.
News of the talks boosted Ethiopia’s sole international bond, which rose as much as 2.6 cents to trade at 94.88 cents on the dollar, according to Tradeweb data.
The East African country defaulted on the bond in late 2023 and opted to restructure under the G20’s Common Framework initiative, which requires equal treatment of debt owed to bilateral, Eurobond, and other commercial creditors.
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The government has been engaging with bondholders for months about potential restructuring scenarios. Temporary non-disclosure agreements, recently signed between Ethiopia and its creditors, marked the formal start of talks.
These agreements allow for a defined negotiation period where discussions remain confidential and could potentially lead to a deal.
In July, Ethiopia reached a restructuring agreement with bilateral creditors that the finance ministry said would provide more than $3.5 billion in cashflow relief, clearing the way for talks with bondholders.
Still, the negotiations face hurdles over whether Ethiopia’s debt difficulties are rooted in solvency or liquidity concerns.
The government has argued for a 20% haircut, citing the International Monetary Fund’s debt sustainability analysis, which it said showed solvency risks.
But investors rejected that proposal, maintaining that Ethiopia’s export performance points instead to a liquidity challenge, which could be managed by extending repayment timelines or similar measures rather than imposing writedowns.
Recent growth in export earnings appears to strengthen bondholders’ position, though the IMF has warned of risks to Ethiopia’s balance of payments outlook, particularly if aid flows and foreign direct investment fall short of expectations.
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Image Credit: Reuters
