Ivory Coast Defaults on Eurobonds, Pledges to Pay

From Bloomberg:

Ivory Coast reneged on $2.3 billion of Eurobonds, becoming the first nation to default in a year. PresidentLaurent Gbagbo’s government pledged to pay creditors, without specifying a date. “We will be making the payment,” Alcide Djedje, foreign affairs minister in Gbagbo’s administration, said in an interview in Addis Ababa, where he’s attending an African Union meeting. “We do have the money of course. We have been paying civil servants. I don’t have a date yet but we will definitely pay.”

The $29 million of interest that was due by midnight in New York after a 30-day grace period hasn’t been received, constituting an “event of default,” Thierry Desjardins, the Paris-based chairman of the London Club group of commercial bank creditors and vice president of sovereign debt restructuring at BNP Paribas SA, said in an e-mail today. The trustee is responsible for the official confirmation of default, he said.

Brady Bonds

Ivory Coast reneged in 2000 on $3.5 billion of Brady bonds, securities created as part of a debt restructuring plan for developing countries and named after former U.S. Treasury Secretary Nicholas Brady. “They’re going to have to build up their credibility” after the political crisis is over, Yvonne Mhango, a Johannesburg-based economist at Renaissance Capital, said in a Jan. 28 phone interview. The country “keeps taking a step backwards. In terms of both of foreign direct investment and portfolio inflows that’s a concern going forward,” Mhango said.

Debt Restructuring

Ivory Coast issued Eurobonds last April as part of its debt restructuring at a yield of 10.181 percent, according to the London Club’s Desjardins, and data compiled by Bloomberg. Duncan Smith, a London-based spokesman for Citigroup Inc., the paying agent on the bonds, declined to comment and referred questions to the issuer, in an e-mail today. Ivory Coast produces a third of the global supply of cocoa and depends on the chocolate ingredient for more than 25 percent of its export earnings. The economy has expanded 1.7 percent a year on average since the civil war ended in 2002, according to the Africa Economic Outlook report. In October, the IMF forecast that gross domestic product would increase 4 percent this year. Cocoa production is expected to expand to 1.3 million metric tons percent this year, from 1.2 million tons last year according to a Dec. 6 Macquarie Group Ltd. report.

Cocoa Prices

Cocoa prices have hit one-year highs on concern the political crisis is disrupting exports after the European Cocoa Association and Federation of Cocoa Commerce Ltd. said there is a “significant slowdown” in flows from the country.

The last country to default was Jamaica on its domestic bonds in January 2010, after the island nation was hurt by a drop in tourism and remittances because of the worst global recession since World War II, according to Moody’s Investors Service.