Bondholders abandon debt-ridden Zambia reports IFR News

ZAMBIA’S dollar notes have lost almost 20points over the past two months, with holders shedding paper that has lost its sheen thanks to rising external debt and alarm bells rung by the IMF.The IMF said in late August that discussions over an aid programme were on hold because Zambia’s borrowing plans remain unsustainable. The country’s external debt rose to US$9.37bn by the end of June from US$8.7bn in December.“Talks with the IMF have been slow, the budget deficit is estimated by the IMF to be close to 8% of GDP for 2018 and copper, which makes up around three-quarters of Zambia’s exports, is down by around 20% since its peak in early June,” said Richard Briggs, emerging markets strategist at CreditSights.“Zambia has been trying to secure an IMF loan for several years but hasn’t yet been able to secure funding.” The country, which is Africa’s second-largest copper producer, wants a US$1.3bn loan from the IMF but the chance of a deal depends on its debt management plans.A trader said that the inability to find common ground with the IMF and tackle the country’s debt problems was hurting the sovereign’s bonds.“Zambia’s efforts to impersonate an ostrich is not going down well, so their dollar bonds make new lows, with even the 2027s above 15% now and local paper paying double that,” said the trader.Zambia’s US$1.25bn 8.97% July 2027s opened August bid at 89.75 and yielding 10.778%, according to Tradeweb. But value has bled away with the notes losing nearly 20 points by Friday. They were last bid at 71.50 to yield 15.34%.The sovereign said last December that it would begin refinancing Eurobonds worth a total US$3bn in 2019 to reduce the cost of debt servicing.In June, Zambia decided to delay all planned borrowing indefinitely, slowing down the accumulation of new debt amid worries about the risk of distress. Zambia (Caa1/B-/B) has been downgraded by both Moody’s and S&P in recent weeks.(Source: This story appeared in the September 7 issue of IFR Magazine) Post Views: 404