By Duncan Miriri and George Obulutsa
NAIROBI (Reuters) -Ethiopia said on Tuesday that debt restructuring negotiations with its bondholders had failed to produce a deal due to ongoing differences over the terms.
The East African nation defaulted on its sole international bond in late 2023 after it opted for a restructuring under the G20’s Common Framework initiative, which requires comparable terms for official sector creditors and commercial bondholders.
Ethiopia’s government said despite the lack of a deal “substantial progress” had been made. It said it hoped talks would resume “in the foreseeable future”.
Both sides have been arguing over whether a restructuring should involve a writedown of the principal amount, known as a haircut, or not.
In a bid to overcome the deadlock, bondholders had proposed the government provide a so-called “Value Recovery Instrument” – effectively an additional bond that would allow them to recoup some of their lost money if the country’s export sector performs well in the next few years.
The committee of bondholders said it was disappointed by the failure of the talks.
It added that it had not seen the restructuring terms Ethiopia struck with official sector lenders and that the committee would now consider all options including legal action.
“While it remains open to considering revised proposals from Ethiopia, the Committee has determined that, at this stage, negotiations have reached an impasse,” it said in a statement.
The defaulted bond at the centre of the negotiations fell 1 cent in the dollar following Tuesday’s statements, although it remains close to its highest price level since early 2021 at 95 cents to the dollar.
(Reporting by George Obulutsa and Duncan Miriri; Editing by Marc Jones and Ros Russell)
