Ethiopia has moved closer to completing the restructuring of its USD 1 billion Eurobond after official creditors approved a preliminary agreement reached between the government and private bondholders, the Ministry of Finance announced.
The approval by Ethiopia’s Official Creditor Committee (OCC) represents a key step toward resolving the country’s default on its only international bond, which matured in 2024.
The OCC, co-chaired by France and China, reviewed the agreement in principle reached between Ethiopia and bondholders in June following several unsuccessful restructuring attempts. The committee confirmed that the agreement complies with the principle of comparable treatment and the terms of the Memorandum of Understanding previously agreed between Ethiopia and its official creditors.
“The OCC considers that, at this stage, the AIP is compliant with the principle of comparability of treatment and the Memorandum of Understanding agreed with Ethiopia,” the committee stated in a letter submitted to the Ministry of Finance.
Following the approval, the government will proceed with implementing the draft restructuring agreement with private creditors, according to the ministry.
Ethiopia reached an agreement with bilateral creditors last year to restructure its official external debt under the G20 Common Framework, a mechanism established to support debt restructuring for countries facing financial difficulties.
However, the OCC raised concerns regarding a proposed “New Money Warrant” included in the agreement with bondholders. The instrument allows investors to purchase up to USD 1 billion of future Ethiopian bonds at market-based interest rates. The government also has an option to settle the warrant in cash, subject to a cap of USD 90 million.
The creditor committee warned that if the warrant provides excessive benefits to bondholders, it could affect the principle of equal treatment between official and private creditors. The OCC said it would closely monitor the implementation of the instrument before considering whether similar arrangements could be used in future debt restructurings.
Ethiopia entered the G20 Common Framework debt restructuring process in 2021 and became the only remaining country undergoing the process. The country defaulted on its Eurobond in 2023 after failing to make a scheduled payment.
The restructuring process has attracted international attention as a test of the effectiveness of the Common Framework, which has faced challenges due to differences between official creditors, private investors, and major lenders.
The final agreement still requires approval from bondholders before it can take effect.
Source: Reuters
