Eurobond Restructuring Efforts Suffer Major Setback As Creditors Committee Rejects AIP

Ethiopia’s bid to restructure its USD one billion Eurobond debt has suffered a significant setback as its creditors committee rejects an agreement in principle (AIP) reached with bondholders earlier this month.

In a letter to Finance Minister Ahmed Shide, Official Creditors Committee (OCC) co-chairs Yang Jing and Thomas Revial stated the AIP—which included terms for a 15 percent haircut, a new USD 850 million bond maturing in 2029, and a USD 350 million principal repayment due in July 2026—would be inconsistent with the official sector debt restructuring framework reflected in the MoU signed with the OCC in July 2025.

“After careful consideration of the agreement in principle (AIP), the OCC considers that it is not compliant with the principle of comparability of treatment and the MoU agreed with Ethiopia. In light of favorable macroeconomic perspectives, the OCC deems that the implementation of the AIP is likely to result in a very low restructuring effort from the bondholders, in breach of the comparability of treatment principle,” reads the letter.

In effect, they argue the agreement would be unfair to the rest of Ethiopia’s creditors.

The co-chairs also stated that “proceeding under these circumstances would pose risks to the macroeconomic stability and economic progress that Ethiopia has worked hard to achieve.”

The decision puts a screeching halt to Ethiopia’s efforts to restructure the terms of repayment on its Eurobond, which it defaulted on three years ago.

The billion-dollar Eurobond was secured in 2014 at an interest rate of over 6.6 percent, and primarily used to fund the construction of industrial parks, including the flagship Hawassa Industrial Park.

The first USD 33 million coupon came due in December 2023, but the Ministry of Finance failed to service it, marking Ethiopia’s first ever default on external debt.

At the time, then state minister of Finance and current NBE Governor, Eyob Tekalign (PhD), told bondholders that “Ethiopia’s decision to withhold the December coupon payment on its Eurobond… stems from the intention to treat all its external creditors equitably.”

In the years since, Ethiopia has been engaged in negotiations with bondholders as part of the country’s efforts for wider debt restructuring under the G20 Common Framework.

Last July, the efforts appeared to bear fruit when Ethiopia signed an MoU with its Official Creditors Committee, granting it USD 3.5 billion in debt relief.

However, just three months later, reports indicated that separate debt restructuring negotiations with bondholders collapsed owing to reservations about the terms of the restructuring and doubts about the veracity of the country’s recent export achievements, particularly relating to gold and coffee.

At the time, a committee representing bondholders said it was considering legal action but remained open to considering revised proposals from Ethiopia.

On January 2, 2026, the Ministry of Finance announced it had reached a preliminary agreement with the Ad Hoc Committee representing investors who control nearly half of Ethiopia’s overdue 6.625 percent notes.

The agreement set terms for a 15 percent haircut, a new USD 850 million bond maturing in 2029, and a USD 350 million principal repayment due in July 2026, with another payment scheduled the following year.

This time, the proposal was rejected by the OCC, which views the updated terms as a violation of the comparability of treatment principle.

Ethiopian authorities say they are determined to continue in their efforts to secure restructuring.

“While Ethiopia regrets the need to reopen discussions, it remains fully committed to working constructively and in good faith with the members of the Ad Hoc Committee and its official creditors to reach a solution,” reads a response from the Ministry of Finance.

The creditors committee says it is willing to work with the Ethiopian government on a solution consistent with the comparability of treatment principle, and compatible with Ethiopia’s commitments under the ongoing IMF program.