ADDIS ABABA, June 1 – Ethiopia’s long-running effort to restructure its defaulted international bond has encountered another obstacle after a group representing bondholders rejected the government’s latest proposal while indicating that some investors may pursue legal action to recover their claims.
The East African nation has been seeking to resolve issues surrounding its $1 billion Eurobond since entering debt restructuring negotiations and subsequently defaulting on the bond in late 2023.
In a statement released on Monday, the bondholder committee said it remains willing to consider alternative restructuring proposals but concluded that the government’s revised offer does not provide a sufficient basis for a mutually acceptable agreement.
The latest setback follows months of negotiations aimed at finding common ground between Ethiopia, private creditors and official bilateral lenders.
Earlier this year, Ethiopian authorities reached a preliminary agreement on key financial terms with bondholder representatives. However, that framework later faced objections from official creditors led by China and France.
The official creditor committee argued that the arrangement failed to satisfy the principle of comparability of treatment, which requires private creditors and official lenders to provide broadly equivalent debt relief terms.
As a result, Ethiopian authorities were forced to revisit the proposal and seek a revised structure that aligned with creditor requirements.
Despite those efforts, bondholders have now rejected the updated offer, extending uncertainty around the restructuring process.
The investor group warned that some of its members intend to proceed with legal claims through English courts, a step designed to protect their contractual rights under the defaulted bond.
The committee did not disclose specific details regarding the potential legal proceedings or identify which investors may participate.
The development adds further complexity to Ethiopia’s debt restructuring process, which has progressed slowly despite repeated rounds of negotiations.
Ethiopia became one of the first African countries to seek debt treatment under the G20 Common Framework, a mechanism designed to coordinate debt restructuring between official and private creditors.
The country’s prolonged negotiations have highlighted the challenges of balancing the interests of multiple creditor groups while maintaining compliance with international restructuring principles.
Despite the latest disagreement, both sides have indicated that discussions remain ongoing and that a negotiated solution remains possible.
Meanwhile, Ethiopia’s defaulted international bond showed little reaction to the latest developments, with market pricing remaining broadly stable as investors continue to assess the likelihood of an eventual restructuring agreement.
The outcome of the negotiations will be closely watched by investors and policymakers alike, as it could influence future sovereign debt restructuring efforts across emerging and frontier markets.
