BlackRock, bondholders should cancel Zambia’s debt – Economists, experts

BlackRock, bondholders should cancel Zambia’s debt – Economists, experts

JOHANNESBURG (Reuters) – More than 100 economists and development experts on Friday called on BlackRock (NYSE) and other Zambian bondholders to cancel some of that debt, saying continuing to pay private creditors was “economically inefficient and morally wrong”.

Zambia became Africa’s first pandemic-era sovereign debt default in nearly two years, and is seeking $8.4 billion in debt relief from 2022 to 2025 under a new restructuring backed by the Group of 20 major economies.

This will be achieved through a combination of reductions in the original value of the loans and an extension of maturity, a senior Zambian Finance Ministry official said earlier this month.

Zambia’s official creditors have provisionally approved the restructuring plan.

In an open letter issued by Debt Justice Group, the signatories – including academics Jeffrey Sachs, Jayati Ghosh, Philip Alston, Raj Patel and Cephas Lumina – said it was time for private creditors to step up.

“It is imperative … that BlackRock and other bondholders agree to engage fully in large-scale debt restructuring, including significant writedowns, in order to make Zambia’s debt manageable,” they wrote.

International bondholders had $3 billion in Zambian debt plus $336 million in arrears of interest at the end of 2021.

The New York-based firm said New York-based BlackRock holds about $215 million in bonds.

A company spokesperson said BlackRock had not been formally asked to participate in the process but would “deal with the overall formal sovereign restructuring actions constructively and in good faith”.

Tradeweb data showed that most Zambian bonds traded between 53 and 55 cents to the dollar on Friday, just over half their face value. This is the lowest level since late July.

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“It seems unlikely that the full value of the investments will ever be realized,” a BlackRock spokesperson said. “Our clients have already suffered losses in relation to their holdings of private sector sovereign debt in Zambia.”

World Bank President David Malpass said last week that “a significant debt reduction of 45% in NPV terms … is essential.”

Kevin Daly, head of emerging market debt at Abrdn, who chairs a panel of bondholders estimated at about 45% of Zambia’s international market debt, said on Thursday that a deep debt reduction would not be acceptable to creditors.

Speaking on Friday, he said the final terms of debt relief should not hinder Zambia’s ability to borrow in the future.

“It is important that they reach an agreement with existing lenders that is fair to all parties that will help facilitate access to external financing when debt sustainability is restored,” he said.

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