Ethiopia announced a preliminary agreement with a group of private creditors to restructure its $1 billion international bond that matured in 2024. The deal, reached between December 23 and January 1, involved the Ad Hoc Committee of bondholders, who collectively hold more than 45% of the 2024 notes. This agreement included a 15% haircut on the original $1 billion principal, reducing the new bond's value to $850 million, and also incorporated a value recovery instrument tied to the country's export performance. Additionally, Ethiopia committed to pay $99.375 million in three missed coupons from December 2023 to December 2024.
The restructuring agreement aimed to replace the defaulted bonds with a new instrument maturing on July 15, 2029, with specific amortization payments of $350 million due on July 15, 2026, $350 million on July 15, 2028, and a final amortization of $150 million on July 15, 2029. The new bond would carry an interest rate of 6.125%, payable semi-annually. This draft deal was seen as a crucial step towards addressing Ethiopia's debt sustainability under the G20's Common Framework initiative, which requires comparable treatment across all creditor types.
However, the agreement faced a significant setback when Ethiopia's official creditors, co-chaired by China and France, rejected the terms as inadequate and violating the "Comparability of Treatment" principle. They criticized the deal as a "very low restructuring effort" from bondholders and expressed concerns about the complexity and potential for "vastly diverging efforts" introduced by contingent debt instruments like the value recovery mechanism. Consequently, Ethiopia announced it would reopen discussions with the Ad Hoc Bondholder Committee to renegotiate the terms, despite its initial commitment to the deal.
