Fitch Ratings recently warned it may lower its rating on Mozambique’s long term sovereign debt even further, following Mozambique Asset Management’s default on 23 May on payment of a US$178 million installment.
“The government is trying to negotiate a new restructuring, but the deadline and terms of that are still uncertain and, as well as that, Fitch may consider this final restructuring as a distressed debt exchange” Fitch said.
A distressed debt exchange is one in which the initial loan conditions are altered and considered to be negative in terms of credit quality even if the changes are beneficial to the investor.
Considering that “there is increasing uncertainty about Mozambique’s capacity to service its debt, given its weak budgetary and external conditions.” Fitch noted it had already lowered its sovereign debt rating three times since November, which could happen again in the next few days.
MAM and Proindicus, another state company, took on loans totalling US$1.4 billion, and the Mozambican authorities did not disclose that debt to investors when, in April, they converted another loan of Empresa Moçambicana a de Atum, another state company. (macauhub/MZ)