Zambia's authorities are preparing to engage in private discussions with a group of investors that have obstructed a government attempt to repurchase a $1.36 billion bond before a coupon increase takes effect later in the year.
People familiar with the matter, who asked not to be identified because the deliberations would be confidential, told Bloomberg News that members of the creditor group may shortly sign non-disclosure agreements to permit closed-door talks about a tender offer the government unveiled last week.
Separately, another individual familiar with the situation said the government remains ready to listen to the bondholders' viewpoints and to explain its rationale for the proposed transaction. That source added, however, that formal negotiations have not yet begun.
Advisers to Zambia on the matter include Lazard & Co. and the law firm White & Case LLP. Representatives for those advisers did not reply to requests for comment.
The sovereign's objective is to retire a bond due in 2053 in advance of a coupon step-up scheduled for later this year. A coalition of creditors now holds in excess of 25% of the securities and has assembled a blocking position, which prevents the government from invoking a clean-up call provision that would allow redemption of the remaining bonds.
The potential move toward confidential dialogue would allow both sides to exchange positions away from public scrutiny and could clarify whether the tender offer can be modified or whether other avenues exist to address the outstanding securities. At this stage, however, the sources emphasize that the presence of a blocking stake means the government cannot unilaterally use the clean-up call mechanism to redeem all outstanding notes.
Context and next steps
The government launched the tender offer last week. If non-disclosure agreements are signed, limited-scope talks could follow, but no public timetable for such discussions was provided by the sources who discussed the matter on a confidential basis.
Reporting note - The advisers named did not provide comment when contacted about the matter.