LONDON, Oct 14 (Reuters) - Zambia's bonds fell heavily on
Wednesday as an escalating standoff between the government and
the country's private sector creditors fed fears of a ugly
default by one of the world's largest copper producers.
One of the country's international bonds with a $42.5
million coupon payment due on Wednesday slumped over 3.5 cents
on the dollar, its biggest drop since April when
the government first signalled it wanted to delay debt payments.
The finance ministry issued a statement late on Tuesday
repeating a request made to creditors last month for a number of
its debt payments to be deferred until April to give it time to
fix its problems.
"Should Zambia fail to reach an agreement with its
commercial creditors (including holders of its Eurobonds)... the
Republic with its limited fiscal space will be unable to make
payments," the finance ministry statement said.
Creditors rejected the original request, saying the
government had not laid out or discussed its plans with them, or
said whether its other key lenders such as China would also
That view hadn't changed on Wednesday.
"A consent solicitation (to delay payments) is very, very
unlikely to be approved by creditors," said one of the members
of the Zambia External Bondholder Committee, Kevin Daly at
Aberdeen Standard Investments in London.
"At this stage we just don't have enough assurances from the
If the Zambian government fails to make Wednesday's bond
coupon payment it has a 30 day 'grace period' where it can still
do so before formally defaulting.
Overall it has $3 billion of Eurobonds outstanding and owes
$2 billion to commercial banks, $2 billion to the International
Monetary Fund and World Bank, and another $3 billion to China.
It woes have been compounded by a 30% drop in the value of
the kwacha this year. The country's debt-to-GDP ratio is
also expected to top 100% having ballooned from just over 30% in
(Reporting by Marc Jones; Editing by Tom Arnold, Kirsten