In response to misreporting concerning a $45 million payment as part of the bondholders restructuring agreement which some media houses have reported as advisors’ fees, the Ministry of Finance of Zambia wishes to issue the following clarification:
The payment in reference is a ‘consent fee’ of 1.5% of the original face value of Zambia’s Eurobonds, payable up to the amount of $45 million to Bondholders who consent to restructure debt they are owed by the Government of Zambia. This debt exchange transaction was recently announced following the Agreement In Principle (AIP) to restructure the Eurobond debt with the steering committee of the Bondholders.
A consent fee is a standard provision included in most debt exchange transactions to incentivise the Bondholders to approve the debt restructuring agreement. A super-majority of Bondholders must approve the agreement once the Exchange Offer is formally launched. The completion of the Eurobond debt restructuring requires that a minimum percentage of the holders of each series of Eurobonds approve the terms of the restructuring.
Therefore, the Government will pay out a consent fee only to Bondholders who consent to the debt restructuring transaction, providing a strong reason for each holder to approve the debt exchange. The total amount paid to Bondholders under this arrangement will not exceed $45 million.
The March 2024 agreement reached with the representative Steering Committee of Bondholders covered Zambia’s three Eurobonds due in 2022, 2024, and 2027 totaling $3 billion. Under the agreement, Zambia’s Eurobond holders agreed to a nominal reduction in debt payments of 22% and to forgo approximately $840 million in claims. Additionally, the Bondholders agreed to provide $2.5 billion of cash flow relief to Zambia between 2023-2025. These significant savings will create the fiscal breathing space necessary for Zambia to remain on a trajectory of sustainable economic growth. The 1.5% consent fee of up to $45 million is an important concession to Bondholders to ensure the completion of this deal.
To learn more about the agreement to restructure debt held by Zambia’s bondholders, click here