A group of Ethiopia's bondholders is moving forward with plans to sue the government over its defaulted $1 billion eurobond after the latest round of restructuring negotiations ended without an agreement. This legal step follows a notice before action that was issued prior to renewed talks last month, indicating the bondholders' intent to pursue legal recourse in English courts. The Ethiopia Ad Hoc Bondholder Committee, representing more than 45% of the 2024 Eurobond, had previously sent a pre-action letter to the government, giving them 14 days to acknowledge the claim.
The deadlock in negotiations arose after bondholders rejected Ethiopia's revised proposal. The Ministry of Finance announced on May 27, 2026, that the restricted discussions on debt restructuring were terminated, expressing regret but reiterating its commitment to finding a market-based solution consistent with the Comparability of Treatment principle and IMF program commitments. This marks the second time in seven months that restructuring talks for the $1 billion Eurobond have collapsed, creating prolonged restrictions on Ethiopia's access to international financing.
Initially, a preliminary agreement was reached in January that included a 15% haircut on the principal and a Value Recovery Instrument (VRI) linked to Ethiopia's export performance. However, this agreement was rejected by the Official Creditor Committee (OCC), co-chaired by France and China, on the grounds that it failed to comply with the Comparability of Treatment principle under the G20 Common Framework, which requires commercial creditors to provide comparable debt relief to official bilateral lenders. The OCC viewed the VRI as problematic, arguing it could lead to vastly diverging restructuring efforts and potentially give bondholders preferential treatment. In response to this feedback, Ethiopia prepared an alternative restructuring proposal that excluded the VRI and was approved by official creditors before being presented to the ad hoc committee of bondholders, but this revised proposal was also ultimately rejected, leading to the current situation where bondholders are pursuing legal action.
