Ethiopia Opens Restricted Eurobond Talks in Paris as Debt Restructuring Gains Momentum











Addis Ababa/Paris – Ethiopia has entered into confidential negotiations with a group of its international bondholders to restructure its $1 billion Eurobond, signaling the most serious progress yet in efforts to resolve its sovereign debt crisis.

According to people familiar with the matter, the restricted talks – held under non-disclosure agreements – began in Paris this week between Ethiopian officials and representatives of the creditor committee. The group includes major institutional investors such as VR Capital Group Ltd., Farallon Capital Management LLC, and Morgan Stanley Investment Management.

The negotiations mark a critical milestone for Ethiopia, which defaulted on its sole Eurobond in December 2023 after failing to make a $33 million coupon payment. The government’s earlier proposal, which asked investors to accept an 18% haircut, was rejected last year, raising concerns over protracted standoffs similar to those seen in Zambia and Ghana.

From Default to Dialogue

The new round of talks comes on the heels of Ethiopia’s March 2025 deal with bilateral lenders, including China and France, to restructure $8.4 billion of official debt under the G20’s Common Framework. That agreement cleared a major hurdle in Ethiopia’s broader debt resolution strategy, unlocking a path to return to discussions with private creditors.

Securing a deal with bondholders is now the missing piece in a restructuring puzzle that has stretched on for nearly three years. Analysts say successful talks would not only stabilize Ethiopia’s strained external finances but also bolster investor confidence in the country’s $3.4 billion International Monetary Fund (IMF) program, approved earlier this year.

“This is the first real indication that both sides are willing to move past last year’s impasse,” said one Africa debt strategist at a London investment bank. “If Ethiopia can secure a deal that aligns with the IMF’s debt sustainability targets, it will mark a turning point for its re-entry into international capital markets.”

Market Reaction

The bond market responded immediately to the news. Ethiopia’s $1 billion Eurobond due 2024 surged to 95.5 cents on the dollar – its highest level in over a year and the largest single-day gain since July 2024. Investors appear to be betting that a deal is now within reach and will involve fewer losses than initially feared.

Still, traders caution that optimism may be premature. While the restricted talks are a positive signal, they are far from a final restructuring agreement. “Markets are pricing in higher recovery values, but the devil will be in the details – coupon structure, maturity extensions, and whether there’s any upfront principal reduction,” said another analyst.

Domestic and Global Stakes

For Ethiopia, resolving the Eurobond is not just a financial imperative but a political one. The government is attempting to stabilize an economy battered by war, drought, foreign exchange shortages, and soaring inflation. External financing has dried up since the default, and restoring access to markets is crucial to attract investment and sustain growth.

Globally, the case is being closely watched as a test for the G20 Common Framework. Ethiopia is one of the first countries to progress significantly through the initiative, which has been criticized for its slow pace and lack of coordination between official and private creditors. A breakthrough deal could set an important precedent for other African nations facing similar debt distress.

What Comes Next

The restricted talks in Paris are expected to continue throughout the week, though neither side has provided a timeline for reaching an agreement. Any deal must satisfy IMF requirements that Ethiopia’s debt return to a sustainable trajectory while also providing bondholders with a credible path to repayment.

Key elements under discussion are likely to include:

Coupon reductions to ease near-term payment pressure.

Maturity extensions to spread repayment obligations over a longer horizon.

Potential partial haircuts on principal, though investors hope these will be minimal given the recent rise in bond prices.

If the two sides can strike a balance, Ethiopia would be positioned to move past its default and gradually restore access to global capital markets – a critical step for financing its ambitious infrastructure and development plans.

Outlook

While risks remain, momentum appears to be shifting in Ethiopia’s favor. The combination of progress with bilateral creditors, IMF support, and bondholder engagement suggests that the country could emerge from its debt crisis sooner than skeptics expected.

“Investors were bracing for a long stalemate, but the latest developments suggest a deal may be achievable within months rather than years,” said a fund manager holding Ethiopian debt.

For now, all eyes remain on Paris – where the closed-door talks may well determine Ethiopia’s financial trajectory for the rest of the decade.