Ethiopia Bond Swap Due in December, US$1B

ETHIOPIA · SOVEREIGN DEBT

The Ethiopia bond swap will close by December, the central bank governor told the Addis Fortune weekly on Saturday 17 October 2026. The deal would replace a defaulted US$1 billion dollar bond with a new US$880 million note.

For US investors in emerging-market debt, this is the last open case among six big post-pandemic sovereign restructurings. Ethiopia has been in default for nearly three years, and the swap would end it.

What the Governor Said in Bangkok

Governor Eyob Tekalegn, who leads the National Bank of Ethiopia, spoke to Addis Fortune at the IMF and World Bank annual meetings in Bangkok. “Ethiopia is the last one to finalise,” he said, adding: “By December, we’ll do the exchange.”

Addis Fortune is a weekly business newspaper in Addis Ababa. The financial terms are settled, but the legal paperwork is not, so the default lasts until the Ethiopia bond swap closes.

How the Default Began

The Ethiopia bond swap targets a US$1 billion Eurobond sold in 2014, when global interest rates were near zero, and due in 2024. In December 2023 the government missed a coupon of about US$33 million, which put the bond in default.

Ethiopia had asked for debt relief in 2021 under the G20 Common Framework, a process that puts China and Western lenders at one table. It has negotiated with private creditors for more than two years since then.

What Bondholders Would Get

Under the Ethiopia bond swap announced on 29 June 2026, holders swap each old note for a new one worth 12% less. The new note totals 143 billion birr (about US$880 million), pays 6.15% a year and ends on 15 July 2029.

Holders would also receive US$99.375 million for three missed coupons, plus a consent fee of 0.5% of the old face value. Ethiopia would pay the bondholder committee a work fee of US$10 million.

The Warrant for a Future Bond

The deal adds a New Money Warrant, a tradable right to buy a future Ethiopian Eurobond of up to US$1 billion. That bond would run seven years and pay 4.5 percentage points above six-year US Treasury yields.

Ethiopia may instead cancel the warrant for cash, capped at 9% of its value, or US$90 million. The window to use it opens on 1 July 2028 and lasts one year.

Why Official Lenders Had to Agree First

Government lenders, grouped as the Official Creditor Committee and co-chaired by France and China, must judge that private investors give comparable relief. The committee found on 20 August that the terms met that test, though its letter called the relief “relatively low”.

Ethiopia has signed 11 of its 14 bilateral agreements with those lenders. A global debt report shows Ethiopia as the only one of six tracked cases with its bond exchange pending.

What Fitch and the Reserves Say

Fitch Ratings, a credit rating agency, kept Ethiopia at “Restricted Default” but said the Ethiopia bond swap could finish this year, Capital reported. A bondholder vote is expected to start within weeks and needs approval from holders of at least 75% of the notes.

Fitch put gross reserves at an estimated US$5.9 billion for the 2025/26 fiscal year, enough for about 2.5 months of payments. It warned that renewed fighting in Tigray since September raises risk, and IMF review talks have slipped to November.

What It Means for US Readers

US funds that own Ethiopian debt would swap a defaulted note for a smaller, shorter one that pays interest again. Pragma Capital chief executive Mere’ed Fikireyohannes told Addis Fortune that finishing the Ethiopia bond swap could prompt rating changes and another Eurobond.

The same adviser called the settlement expensive because US Treasury yields have risen since 2014. On an estimated 4.94% Treasury yield, the future bond’s coupon would be about 9.44%, far above the 2014 coupon.

What Is Not Known

The governor gave no exact date for the Ethiopia bond swap. The non-financial terms and supporting documents are still being finalised, and it is unclear when the formal exchange offer will open.

Holders of the other 55% of the notes have not said whether they will accept. The swap needs the backing of 75%.

More: Ethiopia news in English, every day from The Rio Times.

Frequently Asked Questions

What is the Ethiopia bond swap?

It is an exchange of Ethiopia’s defaulted US$1 billion dollar bond for a new US$880 million note. The governor of the central bank says it will happen by December 2026.

Why is Ethiopia in default?

Ethiopia missed a coupon of about US$33 million in December 2023 on its only Eurobond. It then asked creditors for relief under the G20 Common Framework.

What would bondholders receive?

They would get a new note worth 12% less, paying 6.15% until 15 July 2029, plus US$99.375 million for missed coupons. They would also receive a warrant for a possible future Ethiopian bond.

Has the swap been agreed by everyone?

A committee holding about 45% of the notes agreed the Ethiopia bond swap terms on 29 June 2026, and government lenders cleared them in August. The wider bondholder vote has not yet taken place.

What does the swap mean for Ethiopia’s credit rating?

Fitch has kept Ethiopia at Restricted Default and says it will review the rating once the exchange is complete. A completed swap is one condition for an upgrade.

Sources: Addis Fortune, Last of Six to Close, Ethiopia Sets December for Bond Swap, 17 October 2026; Ministry of Finance of Ethiopia, agreement in principle with the Ad Hoc Committee of bondholders, 29 June 2026; Ministry of Finance of Ethiopia, Comparability of Treatment assessment by official creditors, 20 August 2026; Capital Ethiopia, Ethiopia nears eurobond exchange deal as Fitch flags path out of default, 17 October 2026.

This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error · Editorial responsibility: Matthias Camenzind, Editor-in-Chief

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