Ethiopia Secures Landmark $1 Billion Bond Restructuring Deal as Investor Confidence Rebounds

Ethiopia has taken a major step toward resolving its long-running debt crisis after reaching a preliminary agreement with key bondholders to restructure its defaulted $1 billion international bond. The deal, announced by the country’s Finance Ministry on Monday, is being closely watched as one of the most significant tests of the G20 Common Framework, a global initiative designed to help countries manage sovereign debt challenges through coordinated negotiations with creditors.

Under the proposed arrangement, Ethiopia will replace the defaulted bond with a new $880 million bond that will be repaid in instalments through 2029 and carry an interest rate of 6.15 percent. The government has also agreed to settle $99.4 million in missed coupon payments and pay a consent fee to bondholders. The restructuring package is expected to provide the country with greater financial flexibility while maintaining commitments to creditors.

A key feature of the agreement is the introduction of a “New Money Warrant,” which gives bondholders the opportunity to invest in a future Ethiopian bond issuance of up to $1 billion at a market-linked interest rate. Ethiopia retains the option to settle the warrant in cash, with payments capped at $90 million. The International Monetary Fund has endorsed the structure, stating that it is consistent with Ethiopia’s debt sustainability objectives and broader economic reform plans.

The announcement was welcomed by investors, with Ethiopia’s international bonds rising by 2.9 cents to 108.423 cents on the dollar, their highest level since January. The Finance Ministry also revealed that China and France, co-chairs of the country’s Official Creditor Committee, had not objected to the arrangement, although final approval from the wider committee is still required before the deal can be fully implemented.

The agreement brings an end to years of complex negotiations that began when Ethiopia sought debt relief under the G20 Common Framework in 2021. Since then, the country has faced a series of setbacks, including a bond default in December 2023, failed restructuring proposals and disagreements between official and private creditors. With the latest breakthrough, Ethiopia hopes to complete the restructuring through a bond exchange offer in the coming months, paving the way for stronger economic recovery and renewed confidence among global investors.

source: leadership