Congo Bonds Surge on News Investors Will Be Paid

Congo Bonds Surge on News Investors Will Be Paid

The Republic of Congo’s Eurobonds rose to the highest in more than seven weeks after a contractor claiming money from the government ended an attempt to block a coupon payment through a U.S. court.

The price on the $363 million of amortizing securities due in June 2029 rose about 7 cents to 78 cents on the dollar as of 3:03 p.m. in London, the highest since July 11 and equating to a yield of 11.7 percent.

The rally happened after Delaware Trust Co., the trustee, announced in a statement Tuesday that $21 million of overdue principal and interest will be transferred to investors soon, according to two people familiar with the matter who weren’t authorized to comment publicly. Commissions Import Export SA, a company alleging it’s owed money from the Republic of Congo’s government, on the same day withdrew its attempt to block the payments through the District Court for the Southern District of New York, according to the people.

The Republic of Congo, which is struggling with lower oil income since the crash in crude prices in 2014, sent the funds to Delaware in June before they were due. Commisimpex, as the contractor is known, then got a court order to have them blocked.

Commisimpex is claiming 1 billion euros ($1.18 billion) for work dating back to the 1980s and has pursued litigation through U.S., French and U.K. courts, according to Moody’s Investors Service, which downgraded the central African nation to Caa2, eight levels below investment grade, on July 28.

The country’s finances have been under pressure since the oil slump, with public debt more than doubling between 2013 and 2016 to 77 percent of gross domestic product, according to the International Monetary Fund. President Denis Sassou Nguesso this month appointed a new cabinet, which will lead bailout negotiations with the IMF that began in March.

Delaware Trust and a lawyer representing it at Bryan Cave LLP didn’t respond to emails requesting comment. Government spokesman Thierry Moungalla didn’t answer calls to his mobile phone.

The Republic of Congo was the second African country this year to miss a Eurobond payment after Mozambique, which defaulted on $727 million of notes in January.

— With assistance by Robert Mbakouo


Source: Paul Wallace

www.bloomberg.com




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