gas projects
Featured image: Stock

Earlier this week, the finance ministry declared that it has reached an agreement with its creditors to restructure a $726.5 million Eurobond, including extending maturities and sharing future revenues from its offshore gas projects.

Reuters reported that the southern African country has been battling to recover from a debt crisis after admitting in 2016 to $1.4 billion of previously undisclosed lending, much of which was supposed to be spent on a tuna fishing fleet.

The disclosure prompted the International Monetary Fund and foreign donors to cut off support to the country, triggering a currency collapse and a default on sovereign debt.

However, under the deal Mozambique will issue a new $900 million Eurobond maturing in 2033 with a coupon of 5.875% – just over half what the current outstanding bond was designed to pay in interest.

Repayments of the bond

Principal repayments of the bond, roughly equating to the outstanding sum plus just over $180 million in unpaid interest, would begin in 2029.

According to Reuters, through a separate instrument, creditors will also receive 5% of future fiscal revenues from the Area 1 and Area 4 natural gas projects, though payments will be capped at $500 million.

Speaking to the media, a bondholder close to the situation noted that the plan will provide Mozambique with cash flow relief of around 85%.

“It is a good deal, there are no winners or losers here. All the parties wanted to define a package that is fit for the reality in Mozambique, finding a robust structure with low probability of default in the future and that will mirror the cash flows,” the investor told Reuters.

Investors welcomed the change in stance but some said it was not without risks.

“If we get lower oil prices, higher construction costs or long delays, there is a risk of significantly lower recovery than $500 million,” said one of the bondholders.