Marking a significant milestone in a decade-long financial debacle, Mozambique recently made a settlement payment of approximately $142 million on a $522 million loan, originally arranged by Credit Suisse and now under the wing of UBS Group AG. The settlement is linked to an infamous ship-financing scandal that rocked the nation and the international banking community around ten years ago.
Settling the Scandalous Debt
The settlement payment comprises roughly $96 million in local-currency bonds and an additional $46 million in cash. Initially, when the out-of-court settlement was announced in October, details were noticeably absent. The loan in question had been guaranteed by the Mozambique government, a move that bypassed the International Monetary Fund (IMF) – a requirement that was flouted.
This loan was not an isolated incident but was part of a larger, $2 billion coastal project. Regrettably, the project was soiled by a corruption and bribery scandal that eventually resulted in several court cases and economic upheaval in Mozambique.
The Scope of the Settlement
The settlement primarily covers the substantial portion of the debt that Credit Suisse had arranged for state-owned ProIndicus. However, it is important to note that VTB Capital remains excluded from the settlement. The debt division saw Credit Suisse holding 54% of the debt, other commercial lenders owning 18%, and VTB Capital claiming 28%.
The bonds issued under the settlement have a six-year maturity period. For the first two years, they carry a fixed interest rate, which then floats at the T-bill rate plus 200 basis points.
Aiding the Settlement
To facilitate the cash portion of the settlement, Mozambique utilized part of a $66 million fee from a canceled natural gas exploration project, as stated in an IMF report. This strategic move reflects Mozambique’s commitment to resolving its debt issues and propelling forward its economic development, despite past controversies.
Bloomberg
