Mozambique loan holders will not get future gas revenues in debt overhaul
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INTERNATIONAL – Holders of Mozambique’s state-guaranteed loans ear-marked for restructuring will not receive any instruments allowing them a share in future revenues from offshore gas projects, unlike Eurobond creditors, the country’s legal counsel said.
Mozambique’s government is battling to overhaul its suffocating debt burden after admitting in 2016 to $1.4 billion (R19bn) of previously undisclosed loans, which prompted the International Monetary Fund and foreign donors to cut off support, triggering a currency collapse and a debt default.
Maputo needs to restructure a $535 million state-backed loan to Mozambique Asset Management (MAM) arranged by Russian lender VTB and a similar $622 million facility for maritime security projects at ProIndicus arranged by Credit Suisse. Also due for overhaul is a $726.5 million Eurobond.
“My expectation is that there will be similarities between the deals that the guaranteed lenders get - whether it is ProIndicus or MAM,” Ian Clark, a partner at White & Case, told Reuters.
However, the deal envisaged with holders of the guaranteed loans would differ from the one offered to Eurobond holders, he said. Mozambique announced in November it had reached a deal with the bulk of Eurobond creditors which included extending maturities and sharing future revenues from huge offshore gas projects.
“It may be that the lenders will get loans for example, rather than bonds. Whether the lenders will get value recovery instruments (VRI) will be doubtful,” he said, adding that Finance Minister Adriano Maleiane had ruled out VRIs for loan holders.
Mozambique’s Rovuma Basin boasts natural gas resources of 180 trillion cubic feet, enough to underpin huge liquefied gas export plants under development by global energy firms such as Exxon Mobil, Anadarko and Eni.
Speaking about progress in the restructuring of the Eurobond, Clark also said he had not heard back from Franklin Templeton - one of the major holders.
Farallon Capital Europe, Greylock Capital Management, Mangart Capital Advisors SA and Pharo Management, which make up 60 percent of bondholders, have backed the agreement in principle, according to Maputo.
Apart from those four firms, the steering committee of the Global Group of Mozambique Bondholders (GGMB) which headed the talks also included asset manager Franklin Templeton Investment Management Limited.
“They (Franklin Templeton) have not supported it so far – maybe they will change their mind, we are not writing them off,” said Clark.
“But there is 40 percent of investors out there who still have to decide. It is our job to convince 15 percent of them. So we are optimistic but we are not complacent.”