Ethiopia Strikes Milestone Bond Restructuring Deal

Ethiopia's sole international bond gained value after the government announced a preliminary restructuring deal with bondholders. The agreement, needing IMF and bilateral creditor approval, involves a 15% writedown and a new $850 million note maturing in 2029. The deal is part of efforts to manage external debt.

Ethiopia's only international bond saw an uptick on Monday, according to Tradeweb data, following the Ethiopian government's announcement of a preliminary restructuring agreement with bondholders late Friday.

The $1 billion bond increased by 2.8 cents, reaching a bid of 110 cents on the dollar, as recorded by Tradeweb. The initial agreement was reached after a second round of negotiations concluded early January, while the first round ended in September without consensus on restructuring terms.

This deal, pending approval from the International Monetary Fund and Ethiopia's bilateral creditors, offers a 15% writedown to investors on the principal by exchanging it for a new $850 million bond maturing in mid-2029. The government promised to pay overdue interest should the agreement be finalized, while investors may receive additional payments depending on Ethiopia's export performance. If exports fall short of projections, it may reduce the final amount payable in July 2029. Ethiopia defaulted on this bond two years ago during external debt restructuring under the G20's Common Framework, requiring equal treatment of all creditors. A restructuring agreement with bilateral creditors last July, intended to provide over $3.5 billion in cash flow relief, set the stage for prolonged bondholder negotiations.

(With inputs from agencies.)