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International bondholders have formed a special committee to negotiate with Zambia

June 26, 2020 | Cbonds

The country has been one of the most affected emerging markets since the Covid-19 crisis broke out. Therefore, investors marked its debt burden as risky, and the country declared a liability management exercise for its internal debt. 

Zambia has $3 billion Eurobonds divided into three notes maturing in 2022, 2024 and 2027.

Ten firms that own about 35% of Zambia's total Eurobonds have formed a negotiating committee, which is also in close contact with other bondholders owning 30% of the total outstanding Eurobonds.

Since the start of the pandemic in March, the question of debt relief has been postponed by Central Bank stimulus measures that prevent default and restructuring. In May, the government of Zambia appointed specialists to advise on foreign currency debt restructuring.

Zambia is eligible to participate in the G20 debt service suspension initiative, which provides temporary relief so that the world's poorest countries have a budget to fight the Covid-19 pandemic and redirect funds to the healthcare sector. 

In June, Zambia has appealed to the Paris Club of creditor countries with a request to suspend principal payments and interest payments from May till the end of the year.

The main difference between previous sovereign debt crises and the current one is that holders of sovereign debt will play the main role in the negotiations. A bondholders ' forum has already been established to coordinate debt relief negotiations on the African continent. The Institute of International Finance has also developed guidelines for private sector participation in the negotiations to reduce the debt burden.

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