Aurelia Butler

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Zambia has reached a deal for relief on nearly $4bn owed to private bondholders, raising hopes that a protracted debt restructuring by Africa’s second-largest copper producer is nearing its end.A committee of bondholders agreed to extend maturities and slash interest payments on terms matching recent breakthrough deals with China, Zambia’s biggest lender, and other official creditors, the southern African nation’s finance ministry said on Thursday.President Hakainde Hichilema’s government has suffered a long delay in restructuring $13bn in external debt, including $3bn of foreign currency bonds, since a 2020 default under his predecessor. Chinese and other official creditors failed for years to agree on where losses would fall, meaning Zambia’s restructuring was widely seen as a precedent for other developing countries that had borrowed heavily from Beijing. The process has also been viewed as a test case for a G20 “common framework” for sovereign debt restructuring.The agreement with bondholders comes after Zambia formalised deals to rework $6.3bn of official debts earlier this month, allowing the country to proceed with a $1.3bn IMF bailout. Both agreements provide upfront relief but have also been made possible by a promise to repay more debt if Zambia’s economy fares better than expected in the next few years. This will be based on exports and tax revenue data and an IMF assessment of how much debt Zambia can sustain.The deal “brings us closer to the completion of Zambia’s debt restructuring, which will release significant resources for our developmental agenda”, said Situmbeko Musokotwane, Zambia’s finance minister. The bondholder deal will now need to proceed to an offer to exchange old bonds for newly issued debt. “We hope for the swift implementation of this agreement in principle by the end of the year,” Musokotwane said. Asset managers represented on the bondholder committee include Amundi, Greylock Capital Management and RBC BlueBay.The deal will reduce the face value of the bonds by 18 per cent. Bondholders have gone beyond official creditors and agreed to directly write off $700mn of their claims, which have grown to $3.8bn as post-default interest on bonds originally due in 2022, 2024 and 2027 piled up.Chinese creditors have avoided face value cuts on their Zambian loans. Zambia’s finance ministry said that the cut to overall future cash flows on the private bonds will be “significant”, but has not disclosed precise terms.The scale of debt relief will depend on whether better economic performance for Zambia in the next three years triggers higher payments on a third of the new restructured bonds. These will either mature in 2035, or not be paid back until 2053 if Zambia misses IMF targets.“The proposal represents an innovative and sustainable solution that we hope will set a positive precedent for future sovereign restructurings under the Common Framework,” the bondholder committee said. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.A mere three years after it defaulted, Zambia has finally struck a restructuring agreement with its bondholders. Which is great, but the saga doesn’t exactly bode well for other distressed countries.From the external creditor group representing the $750mn 2022 bond, the $1bn 2024 bond and the $1.25bn 2027 bond:The proposed agreement will provide the Government with significant cash flow and debt stock relief to support a restoration of macro-economic and debt sustainability in the context of the IMF-financed programme and cure the long-standing default on the Eurobonds. The proposed restructuring terms provide both substantial up-front debt relief and future relief commensurate with Zambia’s economic progress in the next few years, with enhanced repayment terms and higher coupons on one of the two new Eurobonds to be issued in the event that Zambia’s debt carrying capacity, as assessed by the IMF and World Bank’s Composite Indicator, moves to medium from weak or Zambia continues to meet or exceed current IMF projections as measured by exports of goods and services and fiscal revenues measured in US Dollars.The creditor statement was light on detail but Zambia’s finance ministry has pinged the LSE with its own statement, which puts the nominal haircut at $700mn, the new average maturity at 15 years and the overall cash flow relief at $2.5bn over the course of the country’s current IMF programme. As expected the restructured bonds include will some sweeteners in case Zambia recovers strongly — the “enhanced repayment terms” creditors referenced above — in the form of faster repayment and higher interest rates. This is in line with what it promised its thorny Chinese creditors earlier this year. But while that is contingent on the IMF upgrading its assessment of Zambia’s “debt-carrying capacity” at the end of its programme, Zambia stressed in its release today that it:. . . acknowledges that a one-time validation test based on the debt carrying capacity assessment by the IMF and the World Bank to determine whether the Upside Case Treatment would apply may not form the basis of a marketable instrument. To ensure liquidity and adequate market pricing of the New Bonds, the agreement in principle entails a dual trigger mechanism.Another separate Zambian finance ministry document lays out the details of this dual trigger. 1) Zambia’s Composite Indicator meets or exceeds a score of 2.69 for two consecutive semi-annual reviews, paving the way for an upgrade to medium debt-carrying capacity. 2) The 3-year rolling average of the USD exports and the USD equivalent of fiscal revenues (before taking into consideration grants) exceeds the IMF’s projections as laid out in the First Review of the IMF’s Extended Credit Facility Arrangement released in July 2023.2 The “Composite Indicator” is an IMF thing, and you can find out more about that here.Anyway, this is obviously good news. But taking a step back it’s hard not to worry about what the length and complexity of this debt workout implies for the many other countries that are already up the creek or paddling towards it. And the Zambian situation really does hammer home the point that the IMF and others have made for ages: countries restructure far too late, and even when they do the debt relief they eventually secure is often too little to secure a durable recovery. As leading sovereign debt lawyer Lee Buchheit once told Alphaville:The common perception is that emerging market sovereigns are looking for an excuse to default on their debt, and, in fact, probably exactly the opposite [is true]. They delay it far beyond the point that anyone would think the situation is reversible. It is a testament to the belief in the efficacy of prayer.Further reading:— Ten lessons from Zambia’s (incomplete) restructuring  More

(Reuters) -Australia’s Coles Group (OTC:CLEGF) posted a marginal rise in its first-quarter sales on Thursday, boosted by higher contribution from its supermarkets section, owing to strong food volume growth as consumers increasingly opted for at-home consumption.Shares of the grocer were trading 0.2% higher, as at 0037 GMT. Stock slipped as much as 1% earlier in the day to A$14.820, its lowest since March 13, 2020.The Supermarkets division, Coles’ biggest revenue-generator, logged sales revenue of A$9.19 billion for the quarter, a 4.7% growth from a year-ago period, as easing prices boosted volumes.Still, the revenue growth missed Jefferies’ expectation of a 5.8% rise and E&P Capital’s 5% estimate, and was also below bigger rival Woolworths’ Australian Food’s growth of 6.4%.Consumers are increasingly opting for in-house consumption as 12 interest rate hikes since May 2022 exerted high living cost pressures on the consumers.However, inflation at Supermarkets declined to 3.1% during the quarter owing to easing prices of fruits and vegetables, meat, seafood and bakery items, boosting volumes.As a result, Coles’ group sales revenue came in at A$10.25 billion ($6.46 billion) for the 13-week period ended Sept. 24, higher than the A$9.89 billion reported a year ago.The grocer added that it ramped up security measures to reduce total loss from stock loss, waste and markdown across supermarkets during the first quarter, and this will continue into the second quarter.”Commentary in the release implies that while waste and markdown has improved, theft has not yet improved and may have continued to worsen,” analysts at Jefferies said.Providing a preview into the second quarter, Coles said in the early part its Supermarkets and liquor divisions logged sales revenue growth broadly in line with the first quarter.Woolworths, the country’s largest grocer, on Wednesday logged an increase in food sales in the first quarter as value-conscious shoppers seized on cheaper meat, fruit and vegetables, but warned of continuing living cost pressures.($1 = 1.5855 Australian dollars) More

Westpac Chief Economist Luci Ellis said the Reserve Bank of Australia (RBA) was now likely to lift its cash rate by a quarter point to 4.35% at its next meeting on Nov. 7, changing her earlier call for a steady outlook.”Inflation is declining, but not fast enough for the RBA to hold rates unchanged,” said Ellis, who until recently was the head of economics at the RBA. “It is going to be a finely balanced decision and a decision to hold still can’t be ruled out entirely.” More

The measure, which is part of Finance Minister Fernando Haddad’s plan to erase the primary budget deficit next year, was approved by 323 votes against 119 and now needs Senate approval.While it represents a victory for the administration of leftist President Luiz Inacio Lula da Silva, the bill ended up with lower tax rates than designed by the government, which initially aimed to raise 20 billion reais ($4 billion) in 2024.Closed-end funds provide attractive investment opportunities by taxing earnings only when distributed to investors. With the proposal, they will now be required to pay semi-annual tax over gains, similar to the current practice for regular funds.Regarding the taxation of offshores, the government’s measure aimed to prevent Brazilian individuals with assets in tax havens from indefinitely deferring the payment of income tax on their earnings. Initially, the government proposed a 22.5% tax rate for profits exceeding 50,000 reais annually, but the version approved by the lower house would establish a levy of 15%. More

LONDON (Reuters) – A number of major European cycling teams have been exploring plans to create a new competitive league in a move that could reshape the sport’s landscape and allocate more funding for participants, three people familiar with the matter told Reuters.External investors could help finance the project, two of the people said, speaking on condition of anonymity because the discussions are private. The venture could amalgamate new and existing races, one of the people said.About five teams around Europe including Ineos Grenadiers are involved in the early-stage talks and more could join, the people said. Tour de France champion Jonas Vingegaard’s Jumbo-Visma team is also involved in the talks, one of them said.Spokespeople for Ineos Grenadiers and Jumbo-Visma declined to comment.Big Four accounting and consulting firm EY is seeking expressions of interest from potential investors for the project and has set a deadline for indications this week, two of the people said. A spokesperson for EY declined to comment.Reuters was not able to ascertain how long the discussions have been going on for. An agreement is not imminent and a deal may not proceed, one of the people said.Among those showing interest is CVC Partners, the former owner of Formula One motor racing, two of the people said. A spokesperson for CVC declined to comment.The project aims to distribute some of the gains from cycling events amongst the teams, which currently rely largely on external sponsorship for funding, the people said.It is a response to the teams concerns that the lion’s share of profits from the main cycling races including the Tour de France, La Vuelta and the Giro d’Italia go to their organisers, people familiar with the plans said.Amaury Sports Organisation (ASO) controls the Tour de France and La Vuelta while the Giro d’Italia is controlled by RCS Sports.Any deal would follow a trend in other global sports such as golf and tennis, where investors have poured in new capital and attracted players and clubs to compete with the older, established events.This is not the first time cycling teams have explored a new cycling league project. Eight teams founded a league project called World Series Cycling (WSC) at the end of 2012 but the plans failed to materialise. More