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ֳ Wire

Gabon’s Liability Management Operation Is Not a Distressed Debt Exchange

Thu 08 May, 2025 - 2:54 AM ET

ֳ-Hong Kong-08 May 2025: Gabon’s recently concluded local-currency liability management exercise does not constitute a distressed debt exchange, ֳ says. However, Gabon still faces high foreign- and local-currency liquidity challenges, as reflected in the sovereign’s ‘CCC’ rating.

The Gabonese authorities announced on 28 April that the exchange of local-currency regional market bonds and bills had been concluded. ֳ has determined that the exchange did not constitute an event of default as it only met one of two necessary criteria: a material reduction in terms, as outstanding bonds were exchanged for longer maturities.

We believe the exchange did not meet the second criterion, that the exchange was designed to avoid a traditional payment default. Our assessment reflects the limited size of the debt exchange relative to total financing needs in 2025-2026, Gabon’s ability to raise new finance (including via debt market access), its improved prospects for an IMF programme, and the incentives that banks had to participate in the exchange.

The operation will lead to a reduction in debt repayments equivalent to around 1.4% of GDP in 2025 and 0.8% in 2026. It also significantly lengthened Gabon’s debt maturity profile. Banks had an incentive to agree to exchange their debt holdings because the new bonds issued under the exchange benefit from a 0% risk-weighting under rules set by the regional banking regulator, reflecting additional safety factors based around resources-linked escrow accounts.

Gabon’s liquidity challenges have been amplified by regional debt market tightness. Nonetheless, Gabon raised significant new funding, equivalent to 4.1% of GDP, on regional markets in 2024 and retains regional debt market access. New funding and securitisation of existing bank debt drove a rise of 7% of GDP in Gabon’s outstanding market debt in March.

Gabon exchanged 5.4% of GDP in local-currency bonds (XAF592 billion), or 34% of its outstanding regional market debt, under the liquidity management exercise. It exchanged 36% of its bills (BTAs, with 13-52 weeks original maturity), switching over half of them to longer maturities, and 27% of its Assimilable Treasury Bonds (OTAs, with original maturities over one year). Gabon also raised 3.1% of GDP in new money, including 2.3% of GDP in new loans amortising over six years at an interest rate of 6.5%.



The availability of foreign currency in the Economic and Monetary Community of Central Africa (CEMAC) has been improving, amid rising liquidity injections by the Bank of Central African States since 4Q24. We also believe the organisation of presidential elections on 12 April 2025 and greater clarity over the direction of fiscal policy have supported Gabon’s debt market access in recent months.

ֳ downgraded Gabon’s ratings to ‘CCC’ in January 2025, based on heightened liquidity strains. Gabon raised around 5.2% of GDP in a private placement of US dollar foreign debt in February 2025, allowing the authorities to buy back the remaining part of its 2025 Eurobond maturity. However, this came at a yield of 12.7%, the highest ever for an African Eurobond issuance.

ֳ forecasts a budget deficit of 2.8% of GDP in 2025, assuming a Brent oil price of USD65 a barrel (bbl) and a tempering of spending programmes. We estimate Gabon’s fiscal breakeven oil price at close to USD85/bbl. We believe Gabon is likely to return to an IMF programme in 2025, following the presidential election. Nonetheless, Gabon’s record of obtaining planned funding from external lenders is poor, which has in the past contributed to the sovereign’s persistent liquidity issues.

Contacts:

Cedric Berry
Director, Sovereign Ratings
+852 2263 9950

ֳ (Hong Kong) Limited
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Jose Mantero
Associate Director, Sovereigns
+44 20 3530 1347


Jan Friederich
Managing Director, Head of EMEA Sovereigns
+852 9664 4024


Duncan Innes-Ker
Senior Director, Risk
Credit Commentary & Research (Including ֳ Wire)
+852 2263 9993






Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@thefitchgroup.com

The above article originally appeared as a post on the ֳ Wire credit market commentary page. The original article can be accessed at . All opinions expressed are those of ֳ.


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