The Ministry of Finance of the Federal Democratic Republic of Ethiopia has issued a new statement regarding the restructuring process of the 6.625% Eurobond debt that was due to mature in 2024. According to the released information, the Ethiopian government conducted a three-week private “Restricted Period” of discussions with a group of private creditors, known as the “Ad Hoc Committee,” spanning from May 6, 2026, to May 27, 2026.
This high-level financial negotiation focused on a new modification plan for the US$1 billion Eurobond debt (ISIN: XS1151974874). During this confidential negotiation, the Ethiopian government was supported by “White & Case LLP” and “Lazard” as legal and financial advisors, respectively, while the bondholders’ committee was assisted by “Weil, Gotshal & Manges London LLP” and “Houlihan Lokey” in an advisory capacity.
The Ministry of Finance explained, with reference to its previous statement issued on January 29, 2026, and the letter sent by the Co-chairs of the Official Creditor Committee (OCC), that the initial preliminary agreement reached with the Ad Hoc Committee in January fulfilled the principle of “Comparability of Treatment” (CoT).
However, a mechanism called the “Value Recovery Instrument” (VRI) was included in that agreement. This mechanism was designed to provide additional payments to creditors based on Ethiopia’s future macroeconomic growth and performance. Nevertheless, in a new assessment provided by the official Official Creditor Committee (OCC), it was stated that the rapidly changing macroeconomic environment in Ethiopia at present is not conducive to implementing this VRI mechanism, and it was consequently rejected.
Based on the feedback received from the official creditors (OCC), the Ethiopian government prepared and presented a new “Revised Proposal” that excluded the VRI mechanism. Before being presented to private creditors, this revised draft was submitted to the Co-chairs of the Official Creditor Committee (OCC), who verified and approved that the draft still fully satisfied the principle of “Comparability of Treatment” (CoT).
However, when this revised draft, which was endorsed by the official creditors (OCC), was presented to the private bondholders (Ad Hoc Committee) during the confidential discussion period, the committee completely rejected the proposed financial content. As a result, the three-week closed-door discussions concluded without any agreement, leading to the official termination of the designated confidential negotiation period (Restricted Period).
Despite the private creditors’ committee rejecting the proposal, the Ethiopian government reaffirmed its steadfast commitment to finding a market-based and equitable solution for the 2024 Eurobond debt. The Ministry emphasized that this solution must align with the principle of “Comparability of Treatment” (CoT) and the economic reform program Ethiopia has entered into with the International Monetary Fund (IMF). Moving forward, the government announced that it will continue its constructive dialogue with all stakeholders and assess available options, such as bond exchange offers.
As detailed in Annex A of the document, the commercial substance of the revised plan presented by the Ethiopian government—which was accepted by the official creditors (OCC) but rejected by the private creditors—included the following points:
The new bond issue amount was set at USD 891 million, reflecting a 12% reduction (haircut) from the original USD 1 billion principal. The maturity date was designated as July 31, 2029. The interest rate was fixed at 4.15% per annum, payable semi-annually on January 15 and July 15 of each year, with the long first interest payment accruing from December 11, 2024, and scheduled to be paid on July 15, 2026. Additionally, a consent fee of 0.5% of the original bond value was to be paid at settlement, and the past due interest of USD 33.1 million, covering the unpaid interest from December 2023 to December 2024, was to be paid in full at settlement.
Under the proposed Amortization Schedule, the principal debt of USD 891 million was structured to be repaid over four years: USD 150 million on July 15, 2026; USD 200 million on July 15, 2027; USD 250 million on July 15, 2028; and USD 291 million on July 15, 2029.
In terms of the Comparability of Treatment Indicators, the proposed terms compared to the OCC allowed thresholds showed a change in Net Present Value (\Delta NPV) of -40.4% against the OCC baseline of -32.5%, a change in duration (\Delta Duration) of 2.5 against the OCC baseline of 3.0, and a reduction in debt service over the program period (\Delta Debt Service) of -48.5% compared to the OCC baseline of -33.3%.
Concluding its statement, the Ministry of Finance indicated that other non-financial detailed matters would be determined in future talks. It clarified that since the instrument is a simple and short-term vanilla mechanism, the government does not expect to provide any special non-market state-contingent guarantees to creditors in the future.
