Zambia has reached an agreement in principle on the restructuring of $3 billion of its international bonds with a creditor group, it was announced on Thursday.
The deal aims to restructure claims on three existing bonds with the issuance of two new "amortising" bonds, maturing in 2035 and 2053, within an economic "base case" scenario.
However, should the country's economy perform better, the second note would also mature in 2035.
As per the deal, the face value of the new bonds would reach $3.135 billion in both scenarios, surpassing the original $3 billion face value of the old notes, Reuters reports.
The nominal haircut stands at 18%, which includes the $821 million of past due interest (PDI) that Zambia ceased paying since it defaulted. According to a ministry statement, the deal would deliver $2.5 billion in cash flow relief for the duration of Zambia's $1.3 billion IMF programme, which is set to expire in late 2025.
After becoming the first African country to default during the pandemic in 2020, the restructuring process has suffered a series of delays.
The agreement "paves the way for similar restructuring agreements with our other private creditors," said Zambia's finance minister Situmbeko Musokotwane.
"We hope for the swift implementation of this agreement in principle by the end of the year."
The country's 2024 bonds rose 3.61 cents on the Dollar to 61.79 cents following the announcement, a high not seen since September 2022, according to Bloomberg. Whilst the 2027 securities rose 3.53 cents to 61.15 cents.
Furthermore, in an additional statement, the Zambia External Bondholder Steering Committee welcomed the agreement, stating it would "restore full international capital markets access to Zambia and encourage long-term investment in the country."