Zambia seeks to defer interest payments for $3 billion of notes

By Rebecca Melvin

New York, Sept. 22 – Zambia is soliciting consents from holders of $3 billion of notes in three series to defer interest payments and make related modifications to those indentures as the sovereign grapples with an unsustainable debt load due to the Covid-19 coronavirus pandemic and other factors, according to a notice on Tuesday.

Specifically, the sovereign is seeking to defer payments for six months to April 14, 2021 for its:

• $750 million of 5 3/8% notes due 2022 (ISINs: XS0828779594, US988895AA69);

• $1 billion of 8½% notes due 2024 (ISINs: XS1056386714, US988895AE81);

• $1.25 billion of 8.97% notes due 2027 (ISINs: XS1267081575, US988895AF56).

A quorum of at least one-third of the holders of the notes is needed to approve the changes. Holders who approve the changes will receive a consent fee of $0.50 per $1,000 bond, and future interest payments will be reduced by an amount equal to the consent fee.

No interest shall accrue during a standstill period set to begin Oct. 14, and breach or alleged breach of obligation under the notes will be waived. All other modifications being sought are deemed necessary to put the interest deferral into effect.

The proposal dated Sept. 22 is intended as a first step to provide Zambia “the necessary breathing time” to analyze the sustainability of its debt and define the parameters of a debt restructuring strategy, which is a pre-condition to obtaining relief lending from the International Monetary Fund.

Zambia said that it is faced with unprecedented liquidity constraints that have been exacerbated by the Covid-19 pandemic resulting in a substantial decline in revenue. A combination of declining revenue and increased unbudgeted costs caused by the pandemic have resulted in a material impact on the government’s available resources to make timely payments on its debt.

Zambia has been engaged with the IMF for a few months to discuss assistance under the IMF’s debt sustainability framework for low-income countries. Zambia also filed with the G20 Debt Service Suspension Initiative and has entered into a memorandum of understanding with the Paris Club of lenders. In line with a G20 recommendation, Zambia has also decided to seek the participation of its external commercial creditors in similar debt services suspension arrangements.

A call with investors will be conducted at 5:30 p.m. ET on Sept. 29. Meetings regarding the consent solicitations are tentatively scheduled to be held in London on Oct. 20, but the meetings may be held virtually.

Morrow Sodali Ltd. is the information and tabulation agent for the consent solicitations.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.