Creditors Back Ethiopia’s Plan to Restructure Eurobond Debt

Ethiopia has moved closer to emerging from default after its official creditors approved a preliminary agreement between the government and private investors to restructure its $1 billion Eurobond. The agreement in principle, reached with bondholders in June, followed several failed attempts to restructure the bond, which matured in 2024. Ethiopia’s Official Creditor Committee, co-chaired by France and China, said the proposal currently complies with the principle of comparability of treatment and the terms of the memorandum agreed with Ethiopia. However, the committee raised concerns about a “New Money Warrant” that could potentially give private bondholders more favorable treatment than bilateral creditors. The warrant allows investors to purchase up to $1 billion of a future Ethiopian bond at a market-linked interest rate, while the government can settle it in cash subject to a $90 million cap. Ethiopia is the last country still undergoing restructuring under the G20 Common Framework, making the outcome an important test of the debt-restructuring mechanism.