Berliner Boersenzeitung - Zambia External Bondholder Steering Committee Statement regarding OCC stance on Comparability of Treatment

EUR -
AED 3.990876
AFN 76.053595
ALL 101.201558
AMD 438.014686
ANG 1.96306
AOA 904.176144
ARS 392.220718
AUD 1.633694
AWG 1.958867
AZN 1.852401
BAM 1.954846
BBD 2.199247
BDT 120.081415
BGN 1.955093
BHD 0.409621
BIF 3098.117017
BMD 1.08675
BND 1.456303
BOB 7.526328
BRL 5.322456
BSD 1.089179
BTN 90.701914
BWP 14.738945
BYN 3.588582
BYR 21300.296139
BZD 2.195549
CAD 1.470861
CDF 2901.622305
CHF 0.948409
CLF 0.034266
CLP 945.507412
CNY 7.755267
COP 4341.815416
CRC 576.424082
CUC 1.08675
CUP 28.79887
CVE 110.211231
CZK 24.361015
DJF 193.937168
DKK 7.456947
DOP 62.030308
DZD 146.216719
EGP 33.470456
ERN 16.301247
ETB 61.196307
FJD 2.416661
FKP 0.855608
GBP 0.857109
GEL 2.928821
GGP 0.855608
GHS 13.081618
GIP 0.855608
GMD 73.21976
GNF 9360.519379
GTQ 8.531759
GYD 227.878824
HKD 8.493493
HNL 26.878134
HRK 7.652425
HTG 144.160994
HUF 379.522443
IDR 16822.506588
ILS 4.03533
IMP 0.855608
INR 90.604827
IQD 1426.903851
IRR 45928.769433
ISK 151.123048
JEP 0.855608
JMD 168.339421
JOD 0.771047
JPY 159.272916
KES 166.603524
KGS 97.046252
KHR 4481.854661
KMF 491.699963
KPW 978.075311
KRW 1418.425343
KWD 0.335578
KYD 0.907657
KZT 502.704743
LAK 22551.997467
LBP 16371.063626
LKR 357.555558
LRD 204.471745
LSL 20.344143
LTL 3.208889
LVL 0.657364
LYD 5.227498
MAD 10.967049
MDL 19.333745
MGA 4950.630271
MKD 61.57108
MMK 2287.405083
MNT 3730.02058
MOP 8.766223
MRO 387.969493
MUR 48.055978
MVR 16.692376
MWK 1833.522344
MXN 18.801217
MYR 5.06154
MZN 68.73687
NAD 20.224197
NGN 857.984788
NIO 39.86092
NOK 11.667779
NPR 145.125532
NZD 1.753911
OMR 0.418291
PAB 1.089269
PEN 4.074812
PGK 4.061056
PHP 60.110345
PKR 306.759563
PLN 4.334862
PYG 8104.120782
QAR 3.956584
RON 4.968354
RSD 117.192825
RUB 98.690471
RWF 1353.851949
SAR 4.076748
SBD 9.211233
SCR 14.261685
SDG 653.136764
SEK 11.31904
SGD 1.450816
SHP 1.322302
SLE 24.707273
SLL 21463.308858
SOS 621.077396
SRD 41.095986
STD 22493.526783
SYP 14129.902786
SZL 20.324271
THB 37.988442
TJS 11.910425
TMT 3.814492
TND 3.383086
TOP 2.562666
TRY 31.425147
TTD 7.389395
TWD 34.118579
TZS 2733.175752
UAH 39.721586
UGX 4141.979236
USD 1.08675
UYU 42.588634
UZS 13397.463726
VEF 3861890.130717
VES 38.618903
VND 26359.116472
VUV 129.038185
WST 2.915866
XAF 655.643162
XAG 0.04317
XAU 0.000525
XCD 2.936996
XDR 0.818408
XOF 655.643162
XPF 119.379285
YER 272.068102
ZAR 20.363193
ZMK 9782.051382
ZMW 25.869617
ZWL 349.932993
  • CMSC

    -0.1600

    24.45

    -0.65%

  • RBGPF

    1.8100

    69.82

    +2.59%

  • NGG

    -0.6300

    66.21

    -0.95%

  • RELX

    -0.2050

    38.355

    -0.53%

  • SCU

    -0.0300

    12.72

    -0.24%

  • BTI

    -0.0800

    31.96

    -0.25%

  • CMSD

    -0.2700

    24.06

    -1.12%

  • VOD

    -0.1650

    9.055

    -1.82%

  • BCC

    -0.3130

    112.077

    -0.28%

  • AZN

    -0.0500

    64.74

    -0.08%

  • RIO

    -2.1590

    69.001

    -3.13%

  • BP

    -0.2700

    35.71

    -0.76%

  • RYCEF

    0.0850

    3.615

    +2.35%

  • SCS

    -0.0360

    12.424

    -0.29%

  • SLAC

    -0.0300

    10.31

    -0.29%

  • JRI

    0.0100

    11.29

    +0.09%

  • GSK

    -0.1000

    36.47

    -0.27%

  • BCE

    -0.1000

    40.21

    -0.25%

Zambia External Bondholder Steering Committee Statement regarding OCC stance on Comparability of Treatment
Zambia External Bondholder Steering Committee Statement regarding OCC stance on Comparability of Treatment

Zambia External Bondholder Steering Committee Statement regarding OCC stance on Comparability of Treatment

LONDON, Nov. 20, 2023 /PRNewswire/ -- The Zambia External Bondholder Steering Committee ("the Committee") is very disappointed and deeply concerned with recent developments with regard to implementing an agreement with the Government of Zambia (the "Government") on a restructuring of Zambia's (i) US$750,000,000 5.375 per cent. Notes due 2022, (ii) US$1,000,000,000 8.500 per cent. Notes due 2024 and (iii) US$1,250,000,000 8.970 per cent. Amortising Notes due 2027.

Text size:

The Committee and the Government announced on Thursday, 26 October that an agreement-in-principle ("AIP") on restructuring terms had been reached after many months of collaborative, but also very challenging, discussions. The proposed agreement provided the Government with significant cash flow and debt stock relief to support a restoration of macro-economic and debt sustainability. Notably both Zambia and the Committee agreed that the AIP was compatible with the targets and parameters of the Debt Sustainability Analysis embedded in the approved International Monetary Fund ("IMF") program and the Comparability of Treatment principle as agreed with its Official Creditor Committee (the "OCC"), as confirmed in the Government's press statement of 26 October.

Following the announcement of the AIP, the IMF requested certain adjustments to the AIP to ensure the fullest possible compatibility with the IMF targets and parameters. The Committee re-engaged in negotiations and revisited the agreed AIP to ensure full IMF support. The Government confirmed that the revised AIP (the "Revised AIP") published by the Government earlier today is compatible with the IMF program parameters and debt sustainability targets.

In light of the additional concessions made in the Revised AIP, the Committee has been deeply disappointed to learn that at a meeting on 17 November, the OCC concluded that the Revised Proposal still does not meet its interpretation of the Comparability of Treatment criteria.

The Committee's Revised AIP provides for more debt relief on an NPV basis than that of the OCC (in addition to providing significant upfront debt forgiveness, while no principal debt reduction is forthcoming from the OCC), ensuring that this would more than meet any reasonable interpretation of Comparability of Treatment. In particular, as set out in the Appendix, the Revised AIP exceeds the net present value effort provided by the OCC by a small margin in the "base case" and a significant margin in the "upside case", using the OCC's own methodology.

We understand that the OCC Co-chairs indicated that they view the Revised AIP as not being comparable with the memorandum of understanding ("MOU") agreed between the OCC and the Government, despite: (i) the IMF's position that the revised proposal meets IMF program parameters and DSA targets; and (ii) the fact that the Government views the Revised AIP (as it did the original AIP) as comparable with the OCC's concessions under the MOU. The MOU is not a public document. The Committee notes that it has been frustrated by this and the current process which requires reliance on the OCC's assessment of comparability in circumstances where a lack of transparency prohibits discussion or independent assessment of comparability by bondholders. Further, we understand that there was no consensus amongst the OCC members as to what would be required from bondholders to comply with their interpretation of the Comparability of Treatment principle. In any event, in taking the position it has, the OCC is demanding debt relief from commercial creditors that is materially higher than either the Government or the IMF deem necessary to restore debt sustainability. In doing so it is creating very clear inter-creditor equity issues and is going far beyond the OCC's envisaged role under the Common Framework in verifying Comparability of Treatment. This is inconsistent with the Common Framework.

This is an extraordinary position to take and will have significant adverse consequences, most immediately for Zambia. It will also completely undermine the already diminishing credibility of the Common Framework. No bondholder will accept official bilateral creditors seeking to re-negotiate the terms of the restructuring agreement they reach with a sovereign debtor in circumstances where the IMF has confirmed that an agreement already meets its own requirements for restoring debt sustainability. It is not for official bilateral creditors to dictate debt terms to other creditors in circumstances where the Government has confirmed Comparability of Treatment.

Given the fiduciary duty they owe their clients, the Committee cannot possibly consider or countenance providing more debt relief than is necessary to restore debt sustainability as defined by the IMF.

The Revised AIP had been finely calibrated to meet the IMF program, and the Government's own, annual constraints. This requires implementation in 2023. The regrettable additional delays resulting from the position taken by the OCC now make it very challenging to resolve the situation in a sufficiently timely manner to allow for an agreement with bondholders to be implemented within the required timeframe.

The Committee continues to stand ready and willing to implement the Revised AIP, supported by the Government and the IMF, if a way can be found to obtain OCC support or otherwise proceed with the debt restructuring Zambia so urgently needs.

Members of the Committee include the following asset managers (acting either directly or on behalf of funds or other accounts they manage): Amia Capital LLP; Amundi (UK) Limited; RBC BlueBay Asset Management; Farallon Capital Management, LLC; Greylock Capital Management, LLC.

The Creditor Committee is being advised by Newstate Partners and Weil Gotshal & Manges (London) LLP Questions can be directed to:

Spencer Jones, Newstate Partners LLP, +44 20 3077 4916 or [email protected]
Annie Emery, Newstate Partners LLP, +44 20 3077 4915 or [email protected]
Andrew Wilkinson, Weil, Gotshal & Manges (London) LLP, +44 20 7903 1068 or [email protected]

For media enquiries:

Greenbrook, +44 20 7952 2000, [email protected]

Appendix

Debt Relief Indicator

Weak Case

Medium Case

OCC

Bondholders

OCC

Bondholders

Nominal haircut1

0 %

16 %

0 %

16 %

Duration extension

12 years

8 years

6 years

6 years

Contribution to the financing of the programme (2023-2025)

 

95 %

 

80 %

 

95 %

 

80 %

Overall Debt Relief

(PV/PV @5%)2

39 %

41 %

13 %

18 %

Overall Debt Relief (PV/PV @5%) (including consent fee)

39 %

40 %

13 %

17 %

 

1 Nominal haircut calculated on contractual claims.
2 OCC methodology comparing the PV of post-restructured debt to pre-restructured debt, evaluated at 5% discount rate. If debt relief is shown to one decimal place the difference in the medium case rounds up to 6%, 5% including consent fee.

 

 

 

(B.Hartmann--BBZ)