November 6, 2012 / 12:47 PM / in 5 years

Investors back new ICoast bond payment scheme

ABIDJAN (Reuters) - Investors have approved Ivory Coast’s plan to make missed coupon payments on its defaulted $2.3 billion bond over the next two years, and issue additional bonds in the series in exchange for some existing bonds, the government said on Tuesday.

Ivory Coast's President Alassane Ouattara smiles after a meeting with France's President at the Elysee Palace in Paris July 26, 2012. REUTERS/Charles Platiau

Holders of around $1.99 billion, or around 85 percent, of outstanding bonds had backed the plan by 5 pm (1700 GMT) on Monday, with 75 percent required for approval, a statement from the West African nation’s finance ministry said.

“The proposed amendments will provide for a revised calendar for the payment of certain interest payments the Republic was unable to make,” the statement said.

Launched in April 2010, the 2032 bond went into default in early 2011 during a civil war that broke out following a disputed presidential election.

Ivory Coast resumed coupon payments earlier this year, and under the proposal to investors it will make up the three missed payments, which total around $96 million, in five installments starting in Dec 2012 and ending in Dec 2014. Bondholders will waive late payment charges on the missed coupons.

The country’s 2032 bond is composed of restructured defaulted debt dating back to 2000. The 2000 debt was in turn a restructuring of previous debt through a Brady bond scheme. The government now plans to expand the Eurobond by up to $187 million in a further restructuring of defaulted debt.

“In addition, the proposed amendments allow the issuance of additional bonds of the same series in exchange for certain other existing bonds,” the statement said.

Analysts said that, while the proposal was broadly expected to reach the 75 percent consent threshold from investors eager to put the issue behind them, its adoption marks an important step on the road to Ivory Coast’s debt market rehabilitation.

The yield on the bond was pegged around 6.7 percent on Tuesday, down from a peak of 17.68 percent in March 2011 during the height of the war.

“Not only are they going to be current with their Eurobond in November and the state of the default will disappear, this is an aggregate deal that will clear everything at once,” said Samir Gadio, emerging markets strategist at Standard Bank.

“Some would say it’s a post-conflict country and Ghana is seen as a bit more stable...but in 12 months or 6 months the spread differential between the two countries is going to dissipate,” he said.

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