Ethiopia has reached a preliminary agreement with major bondholders to restructure its $1 billion defaulted international bond, bringing the country a step closer to resolving a debt crisis that has persisted for several years.
Under the proposed agreement, Ethiopia will issue a new $880 million bond carrying a 6.15% interest rate, with repayments scheduled in installments through July 2029. The government will also settle three missed interest payments worth nearly $100 million, along with a consent fee for participating bondholders.
As part of the deal, bondholders will receive a New Money Warrant, giving them the option to invest in a future Ethiopian bond worth up to $1 billion at market-based interest rates. Alternatively, the government may choose to compensate investors with cash payments of up to $90 million.
The International Monetary Fund has approved the warrant structure, saying it aligns with Ethiopia’s debt sustainability goals. The proposal has also received the backing of the country’s Official Creditor Committee, which includes major bilateral lenders such as China and France.
The agreement follows months of difficult negotiations after Ethiopia defaulted on the bond in December 2023 by missing a $33 million interest payment. Previous restructuring efforts collapsed earlier this year after disagreements between official creditors and bondholders.
Ethiopia plans to complete the restructuring through a bond exchange in the coming months once the remaining non-financial terms are finalized. Investors welcomed the breakthrough, with the country’s international bonds rising to their highest level since January.
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