A 12% haircut, a 6.15% coupon and a novel warrant close Africa’s last pandemic-era sovereign default — and reset the template for frontier restructurings.
On June 29, 2026, Ethiopia’s Ministry of Finance reached an agreement in principle with an Ad Hoc Committee of institutional bondholders controlling roughly 45% of its sole $1 billion Eurobond, closing a restructuring saga that opened with the country’s December 2023 default. The headline terms are strikingly creditor-friendly by recent standards: a 12% haircut on principal, producing a downsized $880 million note maturing on July 15, 2029, at a 6.15% coupon. Rather than a long grace period, the bond amortizes fast — $180 million due in July 2026, $100 million in 2027, and $300 million in each of 2028 and 2029. Addis Ababa will also settle $99.4 million in past-due interest — three missed coupons between December 2023 and December 2024 — in full at closing, alongside a 0.5% consent fee.
The piece that broke a deadlock — talks had collapsed in late May when bondholders rejected a revised offer — is a novel New Money Warrant, issued as a separate, tradable security. It grants existing holders the right to subscribe to a future international bond of up to $1 billion at a market-linked rate; alternatively, the government may make a $90 million cash payment in lieu of issuing it. The structure lets Ethiopia limit today’s cash outlay while offering creditors upside if the country returns to markets, dovetailing with its IMF-backed reform program and its treatment of official creditors under the G20 Common Framework.
Why it matters
Ethiopia is the last of Africa’s three pandemic-era sovereign defaulters — after Zambia and Ghana — to reach terms with private creditors, and it has done so with the shallowest haircut of the three. That is a signal in itself: under the Common Framework, market access can be preserved rather than punished. For frontier investors, a 12% haircut and 6.15% coupon reset a benchmark for how these restructurings can land. For Addis Ababa, clearing the Eurobond overhang unlocks the next tranche of IMF support and revives an investment agenda — the partial privatization of Ethio Telecom, the opening of the banking sector, and a long-promised liberalization of the birr — that had been frozen behind the default.
Sources: Ethiopia Ministry of Finance · Ecofin Agency · CNBC Africa · Bloomberg · Capital Ethiopia · Dawan Africa