Ethiopia: Ethiopia Nears Restructuring Deal With Bondholders

The Ministry of Finance announced today it has reached an agreement in principle with an Ad Hoc Committee representing investors behind its one-billion-dollar Eurobond.

The agreement, which features terms for subscription rights for a new international bond to be issued in the future, is the second such deal between Ethiopia and bondholders this year, and follows the rejection of the first agreement in principle reached in January.

Ministry officials and members of the Ad Hoc Committee, along with their legal and financial advisors, finalized the terms of the deal following negotiations that lasted through most of the past month, according to a statement issued by the Ministry of Finance today.

While the terms have not yet been made public, the statement indicates they include an understanding on an instrument known as a detachable warrant, which grants investors subscription rights for a new international bond that they can trade independently of the existing bond from 2014.

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The International Monetary Fund (IMF) has approved the terms of the new agreement in principle, as have the co-chairs (China and France) of Ethiopia's Official Creditors Committee (OCC), according to the statement.

However, the agreement is still dependent on the approval of the remaining members of the OCC.

The deal will come as a relief to Ethiopian officials, who saw their last agreement in principle with the Ad Hoc Committee rejected by the OCC on grounds that it violated the Comparability of Treatment principle under the G20 Common Framework, under which Ethiopia has been seeking debt treatment for over five years.