Mozambique’s credit rating in rapid decline

16 March 2016

The problems related to restructuring the debt of tuna company Empresa Moçambicana de Atum (Ematum) have led credit rating agencies Moody’s and Standard & Poor’s to lower their rating on Mozambique, according to statements issued Tuesday.

Moody’s, for example, lowered its rating on Mozambique’s new issues of sovereign debt from “B2” to “B3”, which means the bonds are considered high risk and noted that this rating could be lowered further.

The agency said that the decision was based on the reduced capacity of the Mozambican government to serve its own debt, which is shown by the drop in the Bank of Mozambique’s foreign reserves.

In a separate statement Moody’s lowered the credit rating on Ematum from “B2” to “Caa2”, warning bondholders that the bonds are considered highly speculative, are in default or close to it, and that there is little chance of recovering the capital or receiving interest payments.

Standard & Poor’s lowered its rating on Mozambique by four levels from “b-” to “CC”, which means that “the issuer is currently in a highly vulnerable situation”, just two levels away from “D” or default.

The agency also warned that it could lower that rating to “selective default”, if investors receive less than promised when bonds were originally issued by Ematum.

On 9 March Mozambique announced it planned to restructure Ematum’s remaining debt through a swap of bonds maturing in 2020 with a coupon of 6.305 percent for others maturing in 2023. (macauhub/MZ)