Bloomberg reports that Bondholder meetings to vote on Zambia’s request for debt relief were postponed today after failing to reach quorums, increasing pressure Zambia to reach agreement with its creditors before it falls into default.
The meetings will be reconvened on November 13, according to a regulatory filing.
That’s also the deadline to make a coupon payment that Zambia skipped on October 14, before it triggers a default that will give bondholders the right to demand immediate repayment of the principal.
Zambia said last month it won’t be able to meet obligations without a six-month interest-standstill agreement.
The process has been keenly watched by other poor nations seeking debt relief, as well as fixed-income investors worried about where the next potential default may be.
While Zambia said it wants to treat commercial and official creditors on an equal basis, bondholders are concerned any relief they grant would be used to service debts owed to Chinese state lenders, which account for as much as a third of its external liabilities.
“No-one is a winner without an agreement,” said Simon Quijano-Evans, the London-based chief economist at Gemcorp Capital LLP.
“The real way forward is to increase transparency and adopt a multi-pronged approach that includes bondholders, the international finance institutions and China, just like Ecuador did.”
“We have no visibility on the use of proceeds if we agree to a debt standstill,” Kevin Daly, a London-based portfolio manager at Aberdeen Standard Investments in London, which holds Zambian Eurobonds, said before the start of Tuesday’s meetings.
“We have no clarity on how they intend to restructure their Chinese debt, we have no fiscal framework to ensure debt sustainability, and they are unlikely to reach a deal with the IMF ahead of the elections.”
Zambia’s $1 billion of 2024 Eurobonds fell 0.8% to 43.9 cents on the dollar by 1:56 p.m. in London.