Ethiopia's Bond Default Looms as "Loss Reinstatement" Provision Floated

Ethiopia's government is seeking to negotiate a rework of its $1 billion Eurobond and has proposed a "loss reinstatement" provision for bondholders in case of future defaults. The country is facing default after failing to pay a $33 million coupon on its Eurobond, which has a 14-day grace period. The proposal includes addressing the concerns of bondholders who sought such a provision, but it may not meet their exact expectations. Ethiopia's economy is struggling with inflation, a hard-currency shortage, and growing external debt repayments. The government emphasized the need for debt relief to satisfy official creditors, including China, and avoid issues with other creditors. Ethiopia had requested debt relief under the G20's Common Framework and agreed to a debt service suspension with official creditors. Credit rating agency Fitch downgraded Ethiopia to "C" and warned of further downgrades if the coupon payment is not made.