NOT FOR DISTRIBUTION IN ANY JURISDICTION IN
WHICH SUCH DISTRIBUTION WOULD BE PROHIBITED BY APPLICABLE
LAW
Government of the Republic of Zambia Reaches Agreement on Debt
Restructuring Terms with the Steering Committee of the Ad Hoc
Creditor Committee of holders of Zambia's Eurobonds
Lusaka, Zambia, March 25,
2024 - The Ministry of Finance and
National Planning of the Government of Zambia (the "Government"), advised by Lazard Frères
and White & Case LLP, acting respectively as financial and
legal advisors, is pleased to announce that following private
discussions between March 18 to 25, 2024 with the members of the
Steering Committee (the "Steering
Committee") of the Ad Hoc Creditor Committee (the
"Committee"), advised by Newstate
Partners LLP and Weil, Gotshal & Manges (London) LLP, it has
reached an agreement with the Steering Committee on the key
commercial terms of a proposed restructuring transaction (the
"Restructuring") relating
to the Government's bonds due 2022, 2024 and 2027 (the
"Bonds", and the holders
thereof, the "Bondholders"). The members of the
Steering Committee currently own or control approximately 16% of
the outstanding Bonds, while all the members of the Committee
currently own or control more than 33% of the outstanding
Bonds.
Pursuant to the agreement,
Bondholders will be invited to exchange and/or vote in favor of a
consent to amend the terms of their Bonds for new fixed income
instruments representing unsecured obligations of the Government
(the "New Bonds"). The
structure of the agreement is unchanged compared to the agreement
in principle reached on November 20th, 2023, with
revised terms outlined in Annex A hereto
for both the Base Case and Upside Case treatments.
The Government has received
confirmation that the agreed terms are compatible with the OCC's
assessment of comparability of treatment and are compatible with
IMF's program parameters under the Second Review
framework.
The agreement entails important
concessions from the Bondholders, while providing the required debt
relief to the Government. Under the agreement, Bondholders would
forego approximately $840 million of their claims, and provide cash
flow relief of approximately $2.5 billion during the IMF programme
period. Respective weighted average maturity will be 15 years and 8
years under the Base Case Treatment and the Upside Case Treatment.
As a result, the present value concessions from the Bondholders at
current market rates will be significant. However, these
concessions are necessary given the constraints faced by Zambia and
are essential to achieve the relief required under the Debt
Sustainability Analysis to restore financial stability to the
country.
The agreement with the Steering
Committee also includes the Government accepting certain
non-financial terms of the New Bonds, including a most favoured
creditor clause that will require the Government to ensure certain
other creditors do not receive a better recovery in the
restructuring on net present value terms, a loss reinstatement
clause if Zambia were to default during the term of the existing
IMF program and certain ongoing information delivery requirements
by Zambia.
The Government and Steering
Committee intend to use their best efforts to finalize
documentation for the exchange and / or consent
promptly.
The Restructuring will be
implemented through an exchange offer and/or consent solicitation.
Implementation of the Restructuring remains subject to agreement
between the Government and the Steering Committee on the definitive
legal documentation for the New Bonds and exchange offer and/or
consent solicitation.
This announcement is made by the Government and constitutes a
public disclosure of inside information under Regulation (EU)
596/2014 (16 April 2014).
ANNEX A
The "observation period" of the
trigger mechanism is to extend over the period January 2026 to
December 2028, with assessments to be made at each semiannual
payment date with enhanced terms applicable from the date of the
trigger and payable from the next payment date. The agreement
assumes the Upside Case treatment is triggered irrevocably in case
one of the two below conditions is met during the "observation
period."
•
Zambia's Composite Indicator[1] meets or exceeds a score of 2.69 for two
consecutive semi-annual reviews, paving the way for an upgrade to
medium debt-carrying capacity.
•
The 3-year rolling average of the USD exports and
the USD equivalent of fiscal revenues (before taking into
consideration grants) exceeds the IMF's projections as laid out in
the Second Review of the IMF's Extended Credit Facility Arrangement
released in December 2023.[2]
The financial features of the Base
Case and Upside Case Treatment are presented in the next page. The
financial structure is composed of two bonds, Bond A and Bond B. In
case the Upside Treatment is triggered, financial features of Bond
B will be improved through an accelerated payment schedule and
higher interest rates. The financial terms
of Bond A remain unchanged in both the Base Case and Upside Case
treatments.
Note: (1) In addition, the
execution of the transaction would involve the introduction of a
consent fee of 1.5% of the original face value amount of bonds (US$
3bn) to incentivize participation to the exchange
offer.
(2): Trigger date means the
commencement date for the terms relevant to the Upside Case to take
effect.
***
This press release does not
constitute an offer of the New Bonds for sale in the United States,
and the New Bonds (if issued) will not be registered under the U.S.
Securities Act of 1933, as amended (the "Securities Act") or the
securities laws of any state of the United States and they may not
be offered or sold within the United States, except pursuant to an
exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act and applicable
state or local securities laws. This press release does not
constitute an offer of the New Bonds for sale, or the solicitation
of an offer to buy any securities, in any state or other
jurisdiction in which any offer, solicitation or sale (if made)
would be unlawful. Any person considering making an investment
decision relating to any securities must inform itself
independently based solely on an offering memorandum to be provided
to eligible investors in the future in connection with any such
securities before taking any such investment decision.
This announcement is directed only
to beneficial owners of the Government's Bonds who are (A)
"qualified institutional buyers" within the meaning of Rule 144A
under the Securities Act or (B) outside the United States in
offshore transactions in compliance with Regulation S under the
Securities Act, that may lawfully participate in the Restructuring
in compliance with applicable laws of applicable
jurisdictions.
No offer of any kind is being made
to any beneficial owner of Bonds who does not meet the above
criteria or any other beneficial owner located in a jurisdiction
where the offer would not be permitted by law.
Forward-Looking
Statements
All statements in this press
release, other than statements of historical fact, are
forward-looking statements. These statements are based on
expectations and assumptions on the date of this press release and
are subject to numerous risks and uncertainties which could cause
actual results to differ materially from those described in the
forward-looking statements. Risks and uncertainties include, but
are not limited to, market conditions and factors over which the
Government has no control. The Government assumes no obligation to
update these forward-looking statements and does not intend to do
so, unless otherwise required by law.
Notice to Investors in the
European Economic Area and the United Kingdom
Notice to EEA retail
investors. The
announcement contained in this press release is not being directed
to any retail investors in the European Economic Area
("EEA"). As a result, no "offer" of
new securities is being made to retail investors in the
EEA.
This announcement is only directed
to beneficial owners of Bonds who are within a Member State of the
European Economic Area or the United Kingdom (each, a "Relevant State") if they are "qualified investors" as
defined in Regulation (EU) 2017/1129 (as amended or superseded, the
"Prospectus Regulation").
The New Bonds are not intended to be
offered, sold or otherwise made available to and should not be
offered, sold or otherwise made available to any retail investor in
a Relevant State. For these purposes, a "retail investor" means a
person who is one (or more) of: (i) a retail client as defined in
point (11) of Article 4(1) of Directive 2014/65/EU (as amended,
"MiFID II"); (ii) a customer within the
meaning of Directive (EU) 2016/97 (as amended), where that customer
would not qualify as a professional client as defined in point (10)
of Article 4(1) of MiFID II; or (iii) not a qualified investor as
defined in the Prospectus Regulation. Consequently no key
information document required by Regulation (EU) No 1286/2014 (as
amended, the "PRIIPs Regulation") for
offering or selling the New Bonds or otherwise making them
available to retail investors in a Relevant State has been prepared
and therefore offering or selling the New Bonds or otherwise making
them available to any retail investor in a Relevant State may be
unlawful under the PRIIPs Regulation. References to Regulations or
Directives include, in relation to the UK, those Regulations or
Directives as they form part of UK domestic law by virtue of the
European Union (Withdrawal) Act 2018 or have been implemented in UK
domestic law, as appropriate.
United
Kingdom
For the purposes of section 21 of
the Financial Services and Markets Act 2000, to the extent that
this announcement constitutes an invitation or inducement to engage
in investment activity, such communication falls within Article 34
of the Financial Services and Markets Act 2000 (Financial
Promotion) Order 2005 (as amended, the "Financial
Promotion Order"), being a non-real time communication
communicated by and relating only to controlled investments issued,
or to be issued, by the Republic of Zambia.
Other than with respect to
distributions by the Republic of Zambia, this announcement is for
distribution only to persons who (i) have professional experience
in matters relating to investments falling within Article 19(5) of
the Financial Promotion Order, (ii) are persons falling within
Article 49(2)(a) to (d) ("high net worth companies, unincorporated
associations etc.") of the Financial Promotion Order, (iii) are
outside the United Kingdom, or (iv) are persons to whom an
invitation or inducement to engage in investment activity (within
the meaning of section 21 of the Financial Services and Markets Act
2000) in connection with the issue or sale of any securities may
otherwise lawfully be communicated or caused to be communicated
(all such persons together being referred to as "relevant
persons"). This announcement is directed only at relevant persons
and must not be acted on or relied on by persons who are not
relevant persons. Any investment or investment activity to which
the announcement relates is available only to relevant persons and
will be engaged in only with relevant persons.
