Mozambique sinks deeper into default after missing loan payment

Johannesburg - Mozambique missed a $119m payment due on Tuesday on a loan Credit Suisse Group arranged, the second debt repayment the government failed to make in as many months.

The $622m facility was taken out by state-owned ProIndicus and was supposed to fund the purchase of boats and radar systems to protect the country’s Indian Ocean coastline, where companies including Italy’s Eni and US-based Anadarko Petroleum have large offshore gas reserves.

Credit Suisse on Tuesday declined to comment on its financing of Mozambique.

"We are in negotiations with the investors," Finance Ministry spokesperson Rogerio Nkomo said by phone Wednesday from the capital, Maputo.

Donors and the International Monetary Fund froze aid to the government after about $1.4bn of undisclosed loans, including the ProIndicus facility, were uncovered in April last year.

The southeast African nation said in October it couldn’t afford to service its debt and subsequently defaulted on a $60m interest payment on its Eurobonds in January.

In November, Mozambique said it had fallen into $175.5m of arrears on another loan a state-owned company contracted, which the government had guaranteed.

The following are more details on Mozambique’s finances and debt:  

The nation expects to receive $350m in capital gains tax after Eni sold a 25% stake in its gas project to Exxon Mobil, and part of this could go toward paying arrears, according to Verner Ayukegba, sub-Saharan Africa analyst at IHS Markit Economics in London.

A group of holders of the $727m in Eurobonds due 2023 has so far resisted entering into restructuring negotiations until after the government publishes an audit into its debt, due for completion at the end of the month.

They also want to first see the outlines of a new IMF program, and have questions over inter-creditor equity addressed, according to their adviser, Charles Blitzer.

While formal restructuring negotiations haven’t started, Blitzer has been communicating with government advisers, which include Lazard and White & Case, he said on Tuesday.

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