Ethiopia bondholders plan lawsuit as $1 billion debt row escalates

A group of investors holding Ethiopia’s international bond announced plans to sue after the Official Creditors Committee (OCC), co-chaired by China and France, rejected an initial debt restructuring deal. The OCC stated the deal didn’t adhere to the G20’s Comparability of Treatment principle, which requires commercial creditors to accept similar losses to official creditors. The proposed deal involved bondholders taking a 15% write-down on the $1 billion principal through a new bond, plus a value recovery instrument (VRI) linked to Ethiopia’s export value.

The OCC argued that improved economic fundamentals in Ethiopia meant the VRI would create a disproportionate benefit for bondholders compared to official creditors. Debt Justice supported the OCC’s decision, claiming the original deal would have burdened Ethiopia with excessive payments. However, the ad hoc bondholder committee, representing over 45% of investors, criticized the move as causing delays and uncertainty, and announced its intention to pursue legal action in the English court to enforce full payment.

The International Monetary Fund (IMF) has raised its projections for Ethiopia’s export earnings and reserves, citing strong performance in gold and coffee exports. Despite this, Ethiopia’s bond price has fallen following the OCC’s announcement, and concerns are rising about potential renewed conflict in the Tigray region.

(Source：The South African Broadcasting Corporation)