Ethiopia's international bond jumps after draft deal with bondholders

By Duncan Miriri

NAIROBI, Jan 5 (Reuters) - Ethiopia's sole international bond rose on Monday, Tradeweb data showed, after the government announced at the end of last week a preliminary restructuring deal with its bondholders.

The $1 billion bond XS1151974877=TE added 2.8 cents to bid at 110 cents on the dollar, data from Tradeweb showed.

The government struck the initial deal with bondholders in a second round of talks that concluded at the beginning of January, after the first round from late September ended in deadlock over the terms of restructuring.

The deal, which requires approval from the International Monetary Fund and Ethiopia's bilateral creditors, will hand investors a 15% writedown on the principal amount, through exchange with a new note for $850 million that will mature in mid-2029.

BONDHOLDER COMMITTEE SAYS IT WILL KEEP WORKING WITH ETHIOPIA

The Ethiopia Ad Hoc Bondholder Committee, which represents U.S. and European investors who hold more than 45% of the bond, said the terms of the draft deal were compatible with Ethiopia's current financial support programme with the IMF.

"The Committee will continue to work with Ethiopia and its advisers to reach agreement on non-financial terms of the new instruments," the group said in a statement.

The government will pay past-due interest on the bond if the agreement is finalised, it said in a statement, and investors will get additional payments linked to Ethiopia's export performance.

But if exports underperform projections, this could lead to a reduction of the final amount to be paid off against the new bond in July 2029, the statement added.

The East African nation defaulted on the bond two years ago after it opted to overhaul its external debt under the G20's Common Framework initiative, which requires similar treatment of all creditors in the event of a restructuring.

It formalised a restructuring deal with bilateral creditors last July designed to provide cashflow relief of more than $3.5 billion, according to the finance ministry, opening the way for talks with bondholders which have taken months.