Ethiopia has moved closer to ending its debt default after official creditors backed a preliminary agreement to restructure the country’s $1 billion Eurobond.
The Official Creditor Committee, co-chaired by China and France, said the agreement with private bondholders currently meets the required debt-relief principles. The decision allows Ethiopia to move ahead with implementing the restructuring plan.
However, creditors raised concerns about a “New Money Warrant” included in the deal. The instrument could give bondholders more favourable terms than official creditors, potentially requiring the existing restructuring terms to be reviewed.
The warrant would allow bondholders to invest in a future Ethiopian bond of up to $1 billion, or receive a cash settlement capped at $90 million.
Ethiopia defaulted on the Eurobond in 2023, and the restructuring has become an important test of the G20's Common Framework for resolving sovereign debt crises.
Bondholders must still approve the agreement before the restructuring can take full effect.