Mozambique Bondholders Push for Loan Repudiation

By Matt Wirz

Fund managers who own bonds of Mozambique are calling for the country to repudiate government guarantees on loans made to the country by Credit Suisse AG and Russia's VTB Bank. Mozambique defaulted on $762 million of bonds and about $1.2 billion of loans last year, sparking outrage among bondholders who say they should be repaid ahead of owners of the controversial loans.

A recently released audit of the loans by investigations firm Kroll, and a similar investigation by the Mozambican parliament show that there is no legal basis for Mozambique to honor guarantees on the loans made by the administration of former President Armando Guebuza, a group of bondholders said in a statement today.

Kroll found that the process for providing the guarantees was inadequate, violated Mozambican budget laws and may have involved conflicts of interest. The country's parliament stated in a report last year that the guarantees breached the constitution and budget laws but voted in April to legalize the guarantees retrospectively.

A spokesman for Credit Suisse declined to comment. Representatives for VTB and Mozambique's Ministry of Finance didn't immediately return request for comment.

Write to Matt Wirz at matthieu.wirz@wsj.com

(END) Dow Jones Newswires

June 29, 2017 11:56 ET (15:56 GMT)

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