Ethiopia-Ad Hoc Committee AIP: Modest Principal Loss Plus Warrant Narrows Defaulted Stock and Sets Restructuring Template

Ethiopia and an ad hoc committee of holders of the defaulted US$1. 0bn Eurobond reached an agreement in principle that reduces principal to about US$880m, reissues the claim into a new instrument maturing in 2029 with a coupon around 6. 15%, and attaches a tradable new‑money warrant or option tied to a future issuance or capped cash settlement. The Ministry of Finance and reports note official-creditor endorsement activity alongside the private AIP. Transmission to market value comes via two channels.

First, the principal reduction and documented coupon/maturity materially change recovery expectations and reduce the outstanding stock of fully defaulted external debt, improving the bond’s secondary-market liquidity and valuation mechanics for creditors who can now calibrate pull-to-par and coupon carry into 2029. Second, the inclusion of a tradable warrant and visible official-creditor engagement creates a template for comparability and could shorten legal and holdout tail risks, which influences pricing on other stressed or restructuring-exposed African sovereigns where official creditors are engaged. Relative to other frontier sovereigns with unresolved defaults, Ethiopia’s deal represents an explicit, modest recovery for private creditors and a structured linkage to future issuance; that differentiates it from larger restructurings that involved deeper haircuts or longer maturity extension. The most relevant peer set is other African sovereigns with outstanding restructurings or IMF/official-creditor processes, where creditor expectations for structured instruments and new‑money considerations may now shift. The desk will track documentation of final exchange terms and the trading mechanics of the warrant—these are the conditional elements that will determine recoveries and the extent to which this AIP becomes a precedent for other African restructurings.