Zambia’s Bonds Sink on Concern It’s Pulling a Mozambique on Debt

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Investors fretting that Zambia may have more debt than it’s let on have sent the nation’s Eurobonds tumbling.

Yields on the copper-producing country’s $1.25 billion amortizing bonds due in 2027 rose as much as 54 basis points, the most since February 2016, before paring the increase to 50 basis points by 4:35 p.m. in London. At 8.45 percent, the yield was the highest in more than a year.

Banks including Nomura Holdings Inc. say the government may have greater external liabilities than it’s made public. That’s bad news for holders of Zambia’s dollar securities, which were already the worst performers in Africa year-to-date through the end of last week, losing 2.4 percent, according to the Bloomberg Barclays Emerging Markets USD Sovereign Bond Index.

The risk is that Zambian bondholders could find themselves in a similar situation as investors in Mozambique, where hidden debts led to default and the government is seeking to restructure.

No Deal

Zambia has been in talks for several months with the International Monetary Fund about a $1.3 billion bailout, but the two sides have failed to strike a deal, partly because of the Washington-based lender’s concerns about foreign borrowings.

Finance Minister Margaret Mwanakatwe said on Friday she was carrying out a debt sustainability analysis to move the IMF negotiations forward and also wants to “reprofile” $3 billion of outstanding Eurobonds. The nation is already restructuring bilateral loans from Chinese state companies.

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