Agreement in Principle
LONDON, June 29, 2026 /PRNewswire/ -- The Ad Hoc Bondholder Committee (the "Committee") of the Federal Democratic Republic of Ethiopia's ("Ethiopia") 6.625% Notes due 2024 (the "2024 Notes") today provides an update on its most recent engagement with Ethiopia.
The Committee, which collectively represents approximately 45% of the 2024 Notes, confirms that it has reached an agreement-in-principle (the "AIP") with Ethiopia on the principal financial terms of the restructuring of the 2024 Notes.
Details of the AIP are set out in Ethiopia's press release on the Ministry of Finance's website. The AIP provides for a new $880 million bond maturing in July 2029 (the "New Bond"), together with a separate instrument (the "New Money Warrant") which gives each holder the option to subscribe for an allocation of a future bond on the terms set out in the AIP.
The AIP seeks to support Ethiopia's economic recovery by providing significant cash flow and upfront debt stock relief in the context of Ethiopia's International Monetary Fund ("IMF") programme, as well as partnering with Ethiopia to support its future economic growth after the current IMF programme ends.
The IMF confirmed that the terms of the New Money Warrant are consistent with Ethiopia's IMF programme. The Co-Chairs of the Official Creditor Committee ("OCC") have also confirmed that they do not object on comparability of treatment grounds, subject to approval by the wider OCC. The Committee will continue to work with Ethiopia and its advisors to agree definitive documentation.
The Committee advises all holders of the 2024 Notes to thoroughly evaluate Ethiopia's anticipated proposal in light of the AIP and to conduct an independent assessment regarding the merits and risks associated with participation.
Further Committee Comments (not inclusive of Morgan Stanley Investment Management)1:
More broadly, the Committee considers the Ethiopia restructuring process to have exposed broad flaws in the architecture of sovereign debt restructuring and the Common Framework ("CF") process. Ethiopia has languished unnecessarily in default for over 2 ½ years, which has substantially slowed investment in the country, negatively impacting Ethiopia's potential growth. The costs of this have been borne by its citizens.
More than a year prior to its default, the Committee presented a proposed rescheduling to Ethiopia which it considered eminently affordable - a judgment which in retrospect was absolutely correct. Rather than accept this reprofiling, Ethiopia entered into default in December 2023.
In July 2024, Ethiopia and the IMF entered into an Extended Credit Facility ("ECF"). Under the ECF, the IMF produced a debt sustainability analysis ("DSA") based on wildly erroneous estimates. For example, Ethiopia's exports in the first two years of the IMF programme exceeded the IMF's estimates by 129% and 88%, respectively2. Debt-to-export and debt service-to-export ratios are crucial parameters in the IMF's DSA for lower income countries. Consequently, the DSA reached an inaccurate and unnecessarily dire conclusion regarding Ethiopia's debt relief needs.
The Committee reached out to the IMF and held certain meetings with its Ethiopia mission team to present its criticisms of the IMF staff analysis. Aside from politely listening, the IMF gave no indication it took the Committee's arguments seriously. Indeed, subsequent program reviews continued to ignore the growing evidence of a country sharply outperforming program predictions.
Subsequently, the OCC reached an agreement with Ethiopia and sought to bind the Committee to its effective terms via Comparability of Treatment ("CoT") principles. The OCC concluded its agreement with Ethiopia based on projections in the IMF Second Review, which were grossly outdated even prior to the Review's publication at the end of January 20253. Further, the OCC agreement was not concluded until July 2025, on the same date the IMF Executive Board completed the Third Review, and it was evident from data available at that time that projections would need to be revised further upward4. As time passed and Ethiopia continued to outperform, the OCC nevertheless unreasonably insisted the Committee restructure based on outdated assumptions, including incorporating what was by then incorrect historical data.
Despite these unreasonable roadblocks placed in their way by the IMF and OCC, the Committee nevertheless reached an agreement-in-principle with Ethiopia in January 2026. This agreement was acceptable to both Ethiopia and its bondholders. Moreover, both parties considered that it met the OCC's stated CoT principles. However, the OCC, a non-party, rejected the proposal a month later as not meeting its CoT assessment. The OCC provided little rationale other than noting that contingent features (an increasingly common element in sovereign restructurings) "significantly add complexity" to assessments of CoT.5
The Committee's assessment is that the commercial debt restructuring process in Ethiopia was neither quick nor fair. Nor, more importantly, did it advance the interests of the citizens of Ethiopia. The IMF performed its assessment of Ethiopia's debt relief needs poorly. Current architecture puts the IMF in the conflicted position of being both a senior creditor and an arbiter of restructuring outcomes for lower-ranked creditors. Trust in the IMF's ability to perform its referee role impartially has eroded in recent years, with sovereign bondholders noting the IMF's highly unusual intervention ahead of Argentina's 2020 restructuring and concerns similar to those expressed by this Committee voiced by bondholders during Sri Lanka's recent restructuring.
Moreover, bondholders increasingly perceive that official creditors often lend and/or restructure to advance non-commercial agendas. Tying commercial creditor outcomes to official sector outcomes, especially where official sector holdings are dominated by countries with strong geopolitical interests, will become increasingly untenable. Commercial creditors lend for strictly commercial ends and are subject to fiduciary duties.
If the current sovereign debt restructuring framework remains unaltered, the Committee believes negotiations will become increasingly contentious and protracted and agreements, even when reached, will represent Pyrrhic victories where process wins at the expense of the countries it is meant to serve. The Ethiopia case demonstrates the stark limitations of the IMF's DSA process, even assuming the best of intentions. The broadly diverging interests of Ethiopia's bondholders and main commercial creditors further show the limitations of CoT.
Ultimately, if debtor countries are to be well-served by debt restructuring processes, flexibility and sagacity will need to take a place at the negotiating table, tempering blind adherence to a template framework.
Further Comment by Farallon Capital Management, LLC:
While the Committee has reached agreement on the AIP, members of the Committee were not unanimous in their support for the group's collective decision to reach the AIP. In particular, Farallon Capital Management, LLC (Farallon) views the financial terms contemplated by the AIP as ill-suited to addressing what amounts to Ethiopia's need only for limited, near-term liquidity relief; as such, those terms would provide Ethiopia with a level of debt relief materially in excess of what would otherwise be required to restore external debt sustainability. While Farallon remains in favour of certain Committee members' previously articulated decision to pursue a judgment for non-payment on the 2024 Notes in the English courts, it will not maintain this position on its own behalf, so as to preserve the proper functioning of the Committee.
1 The views expressed in this section are not shared by Committee member Morgan Stanley Investment Management ("MSIM") and should not be attributed to it. References in this section to the views of the Committee should not be understood as representing the views of MSIM.
2 FY 2024/25 and FY 2025/26 exports of goods of $8,347m and $8,485m respectively in the IMF Fourth Review report (January 2026) compared to $3,641m and $4,525m respectively in the IMF ECF report (July 2024).
3 News reports in early January 2025 indicated exports of goods had already reached $2.63bn through the first 5 months of FY 2024/25, representing nearly 60% of the subsequently-released IMF Second Review report (published end-January 2025) figures for the full FY 2024/25 (source: https://birrmetrics.com/ethiopias-export-revenues-surge-102-to-2-63-billion-in-first-five-months-after-currency-float/).
4 News reports citing Ethiopia's Ministry of Trade and Regional Integration in June 2025 indicated exports of goods of $7.21bn in the first 11 months of FY 2024/25, compared to $6,370m in the IMF Third Review report (July 2025) and $4,587m in the IMF Second Review report (January 2025) for the full FY 2024/25 (source: https://www.fanamc.com/english/ethiopias-exports-reach-7-21-billion-in-11-months-exceeding-target-by-157/).
5 Source: https://www.mofed.gov.et/blog/ethiopia-announces-assessment-of-official-creditor-committee-that-published-terms-of-eurobond-restructuring-are-noncompliant-with-the-comparability-of-treatment-principle/
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