The Zambian government has asked banks for proposals on reorganizing as much as $11.2 billion of foreign debt as its debt-service costs rise and metal prices plunge, hurting its economy.
The country “intends to implement a liability management of its external debt portfolio to lengthen maturity and enhance its capacity to meet debt-service obligations,” the finance ministry said in a request for proposals sent to lenders, seen by Bloomberg and verified by two of the recipients.
The advisers’ mandate would include assisting the government in negotiations with creditors, as well as “formulating restructuring plans for loans” where creditors agree, according to the document.
The request for proposals is part of Zambia’s plan to put in place measures to ensure debt sustainability and deal with liabilities that will become due in the medium term, Finance Ministry Spokesman Chileshe Kandeta said in an emailed response to questions.
“The government has no intention of unilaterally restructuring its debt without consulting creditors,” Kandeta said. “The government will respect agreements and use market-based instruments where applicable.”
The document was sent to lenders including Barclays Plc, Citigroup Inc., Deutsche Bank AG and Goldman Sachs Group Inc.
The ministry also sent it to Greylock Capital Management LLC, an investor in emerging-market distressed debt.
Any restructuring plan will include debt held by multilateral and bilateral lenders, commercial banks, capital-market investors export-credit organizations and others, the document said.
Zambia’s foreign debt amounted to $11.2 billion at the end of 2019.
Zambia’s currency is the world’s worst performer after Brazil’s this year, and foreign-exchange reserves have fallen to a record low and cover less than two months of imports.
Its $3 billion of Eurobonds have been trading at distressed levels, with yields on notes due 2022 rising above 50%. The bonds extended losses Tuesday.
The selected advisers will “review the entire debt-loan portfolio to identify loans that are plausible for liability management,” according to the request for proposals. They will also “formulate restructuring plans for loans where liability management terms have been agreed to by creditors,” and help arrange financing, it said.
Zambia debuted in the Eurobond market in 2012, when low interest rates in the wake of the global recession and the ensuing hunt for yield among investors meant it could borrow more cheaply than Spain at the time.
Two other Eurobond sales followed in 2014 and 2015.
It’s also contracted billions of dollars in loans for infrastructure projects from lenders including Export-Import Bank of China, Industrial and Commercial Bank of China and Saudi Fund for Development.