S&P lowers Mozambique to CC/C

Standard & Poor's said it lowered its long- and short-term foreign currency sovereign credit ratings on the Republic of Mozambique to CC/C from B-/B.

The long- and short-term local currency ratings were affirmed at B-/B.

The outlook is negative.

On March 9, the government announced that it intends to offer an exchange of the loan participation notes (LPNs) issued by a special-purpose entity, Mozambique EMATUM Finance 2020 BV, against new dollar-denominated fixed-rate notes issued by the Republic of Mozambique, with maturity in 2023. The loan underlying the LPNs was granted to Empresa Mocambicana de Atum SA (Ematum), a 100%-government-owned company, and benefited from a guarantee by the government of Mozambique. The agency views this sovereign guarantee as a financial obligation of the government.

Under its criteria, S&P said it would generally view an exchange offer as tantamount to default

The new notes would extend the maturity of the original notes by about three years. Some details of the restructuring offer – in particular the coupon rate – have not been set yet. The agency noted that investors who do not accept the offer by an early consent deadline may get a lower exchange ratio.

The downgrade reflects S&P’s expectation that, even though investors may technically accept the offer voluntarily, Mozambique’s exchange offer will fulfill the above conditions for Standard & Poor's to consider the exchange as tantamount to default.

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