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Mozambique and Credit Suisse face fresh claims over state-backed loans

Investors in loan notes made to Mozambican state-owned company ProIndicus have filed a claim in the English High Court against the company, Mozambique and Credit Suisse asking for the full amount to be repaid.

Investors in loan notes made to Mozambican state-owned company ProIndicus have filed a claim in the English High Court against the company, Mozambique and Credit Suisse asking for the full amount to be repaid. Credit Suisse arranged the US$622m loan in 2013.

ProIndicus stopped servicing the loan in 2016 when Mozambique defaulted on US$2bn of its obligations that stemmed from a scheme that ultimately saw over US$200m siphoned off in bribes and kickbacks, according to the US Department of Justice.


This happened after a former finance minister, Manuel Chang, gave state-backing to companies involved in tuna fishing and other activities. Some of the loan notes were then swapped for a US$727m 10.5% 2023 Eurobond.

Last year, the country negotiated a restructuring of the Eurobonds but the loans were not part of this agreement. Bondholders swapped their notes for a US$900m 2031 instrument with lower coupons.

A spokesperson for the ProIndicus institutional lenders group said: “Having attempted to enter into constructive dialogue with the other parties but with limited results, the group considers that it has no option but to now resolve the situation through the legal proceedings initiated.”



Law firm Boies Schiller Flexner is representing the group in the proceedings.

The group said the guarantee had been approved by Mozambique’s central bank and confirmed twice by the government.

“The members of the group invested in good faith and on the basis of legally binding agreements, but the debt has now been in default and not been paid for over four years,” said the spokesperson.


It is understood the group consists of investors who are not original holders and bought the loan notes at a discount after rumours started to emerge about the nature of the arrangements. The spokesperson declined to comment on that point.

Three Credit Suisse employees pleaded guilty in the US to accepting bribes to arrange the loan.


Former finance minster Chang has been charged in the US with other connected offences but has not been extradited to face the charges.

Credit Suisse declined to comment on the specific lawsuit from the ProIndicus group.

In its latest financial report, the bank said it was “continuing to respond to requests from regulatory and enforcement authorities regarding certain Credit Suisse entities’ participation in transactions involving Mozambique state enterprises, and is in ongoing dialogue with certain of these authorities”.


Russian state bank VTB, which arranged a separate US$535m loan to another state-backed company – Mozambique Asset Management – also filed a lawsuit in the English High Court at the end of last year. VTB is represented by Freshfields Bruckhaus Deringer. It is understood that loan was not syndicated, unlike the Credit Suisse facility.

Mozambique has also lodged a claim for damages against Credit Suisse in the English High Court.


On the back of the coronavirus outbreak, the 2031 bonds have widened this year from a bid yield of less than 6% at the start of the year to around 9% recently. Coupons on the instruments are due to step up from their current 5% to 9% from 2023.

Earlier this month Fitch reaffirmed its CCC rating of the country’s debt. The ratings agency said that because of the ongoing court cases challenging the validity of the state guarantees it did not constitute the decision to stop servicing the ProIndicus and MAM loans as defaults.

“The status of the two loans with purported state-guarantees to the two former state-owned enterprises, ProIndicus and MAM, remains uncertain,” it said. “The missed payments therefore do not constitute a default under our criteria.”

It noted that Mozambique was discussing a restructuring of its bilateral debts under the G20’s debt service suspension initiative but understood the 2031 bonds and other commercial debt would not be included in such discussions.

Source: Reuters

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