Banks that gave Moza covert loans propose restructuring

 

NEW YORK – Banks that arranged bil­lions of dollars of loans to government companies in Mozambique have pro­posed to restructure some of the now-defaulted debt, as the government of President Filipe Nyusi struggles to re­lieve financial pressure on Mozambique’s economy.

Credit Suisse Group AG proposed the deal in recent weeks on behalf of a group of institutions holding a loan that the Swiss lender and Russia’s Bank VTB Group arranged in secret for a Mozam­bican government-owned company five years ago, people familiar with the mat­ter said. The restructuring would swap the loan into new debt with interest payments tied to Mozambique’s future economic performance, one of the peo­ple said, and would help the banks move past an episode that attracted interna­tional scrutiny to their lending practices.

The first known proposal by the group comes as the country attempts to restore access to international capital markets. Nyusi said in a September interview that Mozambique needs external investment to pay for basic services ranging from health care to water infrastructure.

The debt crisis has become emblem­atic of the risks posed by a surge of bor­rowing conducted in recent years by Af­rican governments that fund managers say have left countries like Zambia and Ghana heavily indebted and at risk of default.

“We need to rebuild roads and we don’t have enough money,” Nyusi said during the interview. “We need water, for example, for food security…we need financing.”

The debt is part of $1,2 billion the banks helped Mozambique borrow soon after the discovery of vast natural-gas re­serves off its coast. Development of the gas fields has been slow and the country defaulted on the debt in 2017 after much of the borrowed funds disappeared.

Foreign governments and financial in­stitutions are unwilling to resume lend­ing to the country until it normalises relations with its private creditors and the International Monetary Fund, which stopped lending to Mozambique when The Wall Street Journal reported the ex­istence of the undisclosed debt.

Mozambique offered in March to re­duce some of its debt and delay repay­ment of the rest until as late as 2034, but creditors rebuffed the deal.

The Credit Suisse group’s proposal, like a previous one by owners of a de­faulted Mozambique bond, suggests swapping their claims into new securities that would pay increasing amounts when gas exports replenish the country’s cof­fers, a concept the Nyusi administration has consistently rejected.

“The proposal does not meet the re­quirements of the authorities and is not considered a viable basis for a solution,” said Ian Clarke, a lawyer for Mozam­bique at White & Case LLP.

Mozambique is also deadlocked with the International Monetary Fund, whose staff was angered by the hidden loans and has demanded answers about who was behind the deals and where the miss­ing funds have gone. The Securities and Exchange Commission and US Justice Department opened investigations of the deals in recent years.

Mozambique’s Justice Department continues to look for the missing funds and is cooperating with the IMF and hopes the fund will resume lending as a sign of good faith and encouragement, Nyusi said.

“We would like them to give us en­couragement,” he said.

An IMF representative declined to comment. The IMF said in April that “full clarity on the use of the proceeds of the previously undisclosed loans con­tracted by three public companies will be critical to restoring confidence and encouraging private investment.” – WSJ

Related Articles

Leave a Reply

Back to top button