Ethiopia’s efforts to restructure its $1 billion 6.625% bond due in 2024 have stalled, as restricted negotiations with a group of private bondholders concluded without a final deal.
The Ministry of Finance announced the collapse of talks, citing disagreements over key terms of the debt restructuring financing as the primary cause. Negotiations, conducted between September 25 and October 13, 2025, failed to produce a debt management plan acceptable to both parties.
Both Ethiopia and the Ad Hoc Committee of bondholders proposed similar terms for the new bond. These included a withdrawal rate of $850 million—reflecting a 15% principal haircut excluding past owed interest—a maturity date set for July 15, 2029, an interest rate of 6.125%, and full payment of three missed coupons totaling $99.375 million upon deal completion.
However, significant differences remained around the Value Recovery Instrument (VRI) and Downside Adjustment provisions. Both proposals tied the VRI to Ethiopia’s annual merchandise exports but differed on operational details and expected values. The Ad Hoc Committee suggested a maximum “percentage fee” of 4.75% and a VRI notional value up to $400 million for export gains exceeding IMF forecasts from 2024/25 to 2027/28. In contrast, Ethiopia’s proposal limited the fee to 1.5% over a longer period (2026/27 to 2035/36), capped annual payments at $30 million, and set the VRI value at $180 million.
Regarding downside adjustments, Ethiopia proposed a single-year adjustment (2027/28) if exports fell below 95% or 85% of the IMF’s forecast, while the bondholders’ committee favored adjustment across the entire IMF program period (2024/25 to 2027/28), based on total commodity exports.
The Ministry acknowledged that future restructuring would require agreement on non-financial contract terms raised by the Ad Hoc Committee but not formally addressed during talks.
Despite the setback, Ethiopia reaffirmed its commitment to cooperative debt management principles and pledged to continue engaging in good faith with all creditors, including the Ad Hoc Committee. The government also plans to work with the Public Creditors Committee and the IMF to explore options to close remaining gaps.
Ethiopia was advised by White & Case LLP and Lazard, while the Ad Hoc Committee was represented by Weil, Gotshal & Manges (London) LLP and Ankura Sovereign Advisors LLP.
In an official statement on October 14, 2025, the Ministry of Finance emphasized its readiness to collaborate with all lenders and the IMF, aiming to find alternative solutions and resume progress on debt restructuring.
