Zambia, bondholders kick off formal talks on $3 billion debt restructuring- sources

By Jorgelina do Rosario and Karin Strohecker

LONDON (Reuters) -Zambia’s international bondholders have formally started debt talks with the government this week, according to three sources, a key step to restructure more than $3 billion of overseas bonds.

A group of the country’s biggest private creditors has entered into a restricted period, which means they temporarily cannot trade the country’s notes in exchange for non-public information, the sources added, asking not to be named because the discussions were private.

The non-disclosure agreements(NDA) would be still in place next week, one of the sources added, when Zambia officials and creditors are set to meet in person during the World Bank and International Monetary Fund annual meetings in Marrakech.

The Zambia Finance Ministry declined to comment.

Africa’s second-biggest copper producer is also expected to sign a memorandum of understanding (MOU) with bilateral creditors such as China and the Paris Club to rework about $6.3 billion of debt.

The country is still in default after becoming the first African nation to suspend debt payments during the 2020 COVID-19 crisis.

Zambia has three outstanding dollar bonds maturing in 2022, 2024 and 2027, trading at 51-56 cents on the dollar.

Amia Capital, Amundi, BlueBay Asset Management, Farallon Capital Management and Greylock Capital are on the steering committee of the creditor group that holds around 45% of Zambia’s total outstanding international bonds.

The sources declined to comment how long the restriction period would last. Creditors were discussing mechanisms that would revamp payments through higher coupons, shorter debt maturities or a combination of both, one of the sources said.

At the end of 2022, Zambia’s debt to international bondholders was $3.5 billion, including $520 million interest in arrears.

The deal with official creditors already includes a mechanism to accelerate loan repayments and raise interest if Zambia’s capacity changes from the current “weak” to “medium” following a joint International Monetary Fund (IMF) and World Bank assessment in 2026.

The IMF said in July that the country is expected to reach a debt restructuring deal with its international bondholders by the time the Washington-based lender undergoes a second review of its rescue loan programme with the country later this year.

(Reporting by Jorgelina do Rosario and Karin Strohecker, editing by Alex Richardson)