Ethiopia’s eurobond traded higher on Monday after the government said it has tentatively agreed on key terms for a debt workout with private bond investors.

Tradeweb pricing indicated the country’s USD 1 billion bond (XS1151974877) was bid around 2.8 cents higher, at roughly 110 cents on the dollar.

The finance authorities said the outline agreement was reached in a second set of negotiations that wrapped up in early January. A first round of talks held in late September last year ended without consensus on restructuring terms, the government noted.

The proposed deal still needs sign-off from the International Monetary Fund and Ethiopia’s bilateral creditors. Based on the government’s statement, bondholders would accept a 15% cut to principal, implemented through an exchange into a new instrument with a face value of USD 850 million and a maturity in mid-2029.

Ethiopia also said it would settle overdue interest if the agreement is completed. In addition, the package includes payments that would depend on export performance. The statement added that if exports fall short of projections, the final amount due at the bond’s maturity, scheduled for July 2029, could be reduced.

Ethiopia entered default on the bond two years ago after choosing to pursue a broader external debt overhaul under the G20 Common Framework, which seeks comparable treatment across creditor groups.

In July, the government formalized a restructuring arrangement with bilateral creditors that the finance ministry said would deliver more than USD 3.5 billion in cash-flow relief, creating room to continue negotiations with bondholders.

Source: CNBC Africa