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Zambia External Bondholder Steering Committee and Government Reach Landmark Debt Restructuring Agreement

The Zambia External Bondholder Steering Committee (the “Committee”) has successfully negotiated a conclusive agreement with the Government of Zambia on the restructuring of Zambia’s Eurobonds, totaling US$3 billion.

The agreement, termed the “2024 Agreement,” addresses the restructuring of three Eurobonds: US$750 million 5.375% Notes due 2022, US$1 billion 8.500% Notes due 2024, and US$1.25 billion 8.970% Amortising Notes due 2027.

Following months of deliberation and negotiation, the Committee and the Zambian Government have aligned the terms of the 2024 Agreement with the assessment of comparability of treatment by Zambia’s Official Creditor Committee (OCC) and the International Monetary Fund’s (IMF) program parameters under the Second Review framework.

The agreement comes after the OCC’s determination in November 2023 that the previous agreement-in-principle (AIP) did not meet the requirements outlined in the memorandum of understanding (MOU) regarding comparability of treatment provisions.

While the 2024 Agreement builds upon the foundation laid by the November 2023 AIP, it provides additional debt relief necessary to address Zambia’s economic challenges, including a standing default on the Eurobonds. These concessions were deemed essential to garner the support of key stakeholders, including the IMF and the OCC, in a timely manner.

Under the terms of the 2024 Agreement, two new Eurobonds (referred to as Bond A and Bond B) will be issued, offering future debt relief proportional to Zambia’s economic progress. The agreement includes provisions for enhanced repayment terms and higher coupons on Bond B, contingent upon Zambia’s improvement in debt carrying capacity and meeting or exceeding current IMF projections.

Crucially, the agreement encompasses non-financial terms such as a most favored creditor clause, loss reinstatement clause, and ongoing information covenants, ensuring a comprehensive framework for debt restructuring.

A spokesperson for the Committee expressed satisfaction with the collaborative efforts that led to the definitive agreement, emphasizing its potential to restore full international capital markets access to Zambia and attract long-term investment, benefiting the nation and its citizens.

The 2024 Agreement’s key elements are outlined in a press release by the Government of Zambia. Implementation is contingent upon mutual agreement on deal documentation, with a focus on expeditious execution.

The Committee encourages all Eurobond holders to thoroughly evaluate the terms of the Government’s prospective offer in light of the 2024 Agreement and make independent assessments of participation risks and benefits.

The Committee comprises prominent asset managers such as Amia Capital LLP, Amundi (UK) Limited, Farallon Capital Management, LLC, Greylock Capital Management, LLC, and RBC BlueBay Asset Management. Advisory services are provided by Newstate Partners and Weil Gotshal & Manges (London) LLP.

The agreement marks a significant milestone in Zambia’s efforts to address its debt burden and pave the way for sustainable economic recovery.

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