Ethiopia will reopen talks to restructure its $1 billion international bond after official creditors, including China and France, expressed concerns that a proposed agreement did not meet their standards, Reuters reported.
Earlier this month, Ethiopia announced it had reached a preliminary restructuring deal on the main financial terms with a group representing holders of its sole international bond.
However, any agreement required approval from bilateral lenders, represented by the Official Creditor Committee (OCC).
“The OCC, through its co-chairs, has informed Ethiopia of its assessment that the (draft restructuring deal) … does not fully meet the requirements of the Comparability of Treatment principle,” the finance ministry said on its Facebook page on Friday.
Under the G20’s Common Framework, this principle requires commercial creditors to be treated similarly to official counterparts.
Neither the Paris Club of official lenders nor the bondholder committee immediately commented on the announcement.
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Under the January 2 deal, bondholders would have accepted a 15% writedown on the principal debt in exchange for a new $850 million note maturing in mid-2029.
The agreement also proposed a value recovery instrument linking payouts to Ethiopia’s export performance.
Official creditors described the deal as a “very low restructuring effort” from bondholders.
Co-chairs China and France also warned that value recovery instruments could complicate comparability assessments and risk creating “vastly diverging efforts” between bondholders and official lenders.
Contingent debt instruments have gained popularity in recent years to speed up restructurings, having been used in Sri Lanka, Ukraine, and Zambia.
Ethiopia’s finance ministry said it would resume discussions with the Ad Hoc Bondholder Committee, which represents U.S. and European investors holding over 45% of the 2024 Eurobond.
“While Ethiopia regrets the need to reopen discussions, it remains fully committed to working constructively and in good faith with the members of the (bondholder) Committee and its official creditors,” the ministry said.
Ethiopia defaulted on the Eurobond in late 2023 and is restructuring its debt under the G20’s Common Framework.
The country’s tightly held bond last traded unchanged at 107.00 cents on the dollar, according to Tradeweb data.
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Image Credit: Reuters
