Ethiopia’s effort to restructure its USD 1 billion international bond faced a new setback after bondholders rejected a revised proposal that had been adjusted to address concerns raised by official bilateral creditors.
The Ministry of Finance said the revised offer was rejected during formal negotiations with an ad hoc committee of bondholders, prolonging the country’s debt restructuring process. The talks are part of Ethiopia’s broader debt treatment under the G20 Common Framework, a mechanism designed to support debt relief for lower-income countries.
Ethiopia began seeking debt restructuring in 2021 and defaulted on its only international bond in 2023. In January, the government reached a preliminary agreement with a group representing bondholders on the main financial terms of a restructuring. However, official bilateral creditors, represented by the Official Creditor Committee co-chaired by France and China, later said the agreement did not meet the Comparability of Treatment principle.
The principle requires a debtor country to seek broadly comparable debt relief from different creditor groups. Following those concerns, the government revised its proposal. The updated offer was approved by official creditors before being presented to bondholders in the latest round of talks.
According to the Ministry of Finance, the ad hoc committee rejected the revised proposal, after which the restricted negotiation period was terminated. The government said it will assess available options to resolve the matter, including a possible exchange offer or other market transaction related to the 2024 notes.
Under the January agreement, bondholders would have accepted a 15 percent reduction in the principal amount through an exchange for a new USD 850 million note maturing in mid-2029. That proposal also included a value recovery instrument, which would have linked potential payouts to the value of Ethiopia’s exports.
The revised proposal did not include such an instrument. Official creditors had raised concerns that Ethiopia’s improving economic indicators, including export earnings, could result in uneven contributions from different creditor groups if bondholders benefited from export-linked payments.
The rejection leaves Ethiopia’s bond restructuring unresolved despite its earlier agreement with official creditors, which was formalized in July last year. The deadlock also adds to concerns over the pace and complexity of the Common Framework process, which has faced criticism in restructuring cases involving Ethiopia, Zambia and Ghana.
There was no immediate comment from the investor committee.
Source: CNBC Africa
