Ethiopia has officially begun restructuring talks with investors holding its $1 billion international bond, according to a source familiar with the process who spoke to Reuters on Monday.
The discussions are being held in Paris, the source said, confirming an earlier Bloomberg report. An official from Ethiopia’s Ministry of Finance also confirmed that a government delegation traveled to the French capital but did not share further details.
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“There were meetings scheduled with bondholders,” the source noted, adding that a briefing on the discussions could follow, though no agreement is expected soon.
Neither the new central bank governor, Eyob Tekalign, nor representatives of an ad hoc bondholder group responded to requests for comment.
Market Reaction
Following news of the talks, Ethiopia’s only Eurobond gained as much as 2.6 cents, trading at about 94.88 cents on the dollar, according to Tradeweb data.
The country defaulted on the bond in late 2023 and chose to pursue debt restructuring through the G20’s Common Framework, which calls for equal treatment of bilateral, Eurobond, and other commercial creditors.
From Informal Engagement to Formal Negotiations
Ethiopian officials and bondholders have been in contact for months regarding possible restructuring options. However, the signing of temporary non-disclosure agreements marks the shift to formal negotiations. During this period, both parties are restricted from sharing details externally and can work toward a concrete deal.
In July, Ethiopia reached a restructuring agreement with bilateral creditors that is expected to deliver more than $3.5 billion in cashflow relief, opening the door to parallel talks with private bondholders.
Core Disagreement: Liquidity vs Solvency
Negotiations have been complicated by disagreement over the nature of Ethiopia’s debt distress. The government argues it faces a solvency problem and has proposed a 20% haircut, citing the IMF’s debt sustainability analysis.
But investors representing bondholders dispute this, pointing to improved export earnings and arguing the issue is one of liquidity. Under that view, the default could be resolved through measures such as extending repayment terms rather than imposing losses on investors.
Recent growth in export revenues appears to support the bondholders’ position, though the IMF has warned of potential downside risks tied to weaker aid inflows and foreign direct investment.
Source: Reuters
