Govt previews refinancing of US$2.8bn Eurobonds

Thu, 22 Dec 2016 11:34:40 +0000

By BUUMBA CHIMBULU

 REFINANCING the US$2.8 billion Eurobonds in 2017 will be determined by the satisfaction of the market fundamentals such as being able to obtain longer repayment terms and achieving lower rates, says minister of Finance Mutati.

Refinancing a bond is the process through which a company reorganises its debt obligations by replacing or restructuring existing debts.

In an interview, Mr Mutati said Government would assess the market which would determine whether or not it could go ahead and refinance the Eurobonds in 2017.

“We shall have to look and make an assessment, can we be able to refinance a Eurobond in 2017 at a price lower than the one that we got it at, if the answer is yes, then we shall do it,” he said.

Mr Mutati said one of Government’s key deliverables for 2017 was to refinance the Eurobond, but he was quick to mention that timing would depend on market conditions.

“We need to taste the market, whilst the fundamentals externally may be weak, it is better to test the market and see whether at this moment in time in the first or second quarter it is possible to get a pricing that is superior,

“So yes we shall hold on, we will not take the decision unless we can achieve a superior price and for us timing is critically important,” he said.

Mr Mutati emphasised that Government would however taste the market if possible

He said Government was clear on what it wanted to do in 2017 which included formulating a debt sustainability analysis.

He explained that to see its ability of being able to meet the repayment of the Eurobonds in 2017 and going beyond, which he said would give Government the headroom of how much more it could borrow.

“There is no need to refinance a bond if you do not achieve a lower cost and longer repayment terms, there is no logic,

“So those two variables must be able to be satisfactory for us to take that  particular decision, what the stakeholders are saying is not strange, it is part of the totalities of the ingredients that we are undertaking and evaluating,” he said.

Mr Mutati said the overall objective was that Government wanted to reduce the content of debt repayment from almost 20 percent of domestic revenue to a lower percentage to raise some resources for development.

He was responding to concerns from stakeholders that Government should halt refinancing the bonds because the market conditions were currently tight.