A group of international bondholders has warned that some members are preparing to pursue legal action against Ethiopia after rejecting the government’s latest proposal to restructure its defaulted US$1 billion international bond, underscoring continued tensions in the country’s debt overhaul process.
The bondholder committee said on Monday it remained open to revised proposals but argued that the government’s most recent offer did not constitute a viable basis for a consensual restructuring agreement.
“While the Committee remains open to considering alternative solutions, the Revised Proposal does not provide for a viable consensual restructuring solution,” the group said.
Ethiopia, which defaulted on its sole international sovereign bond in 2023, has been seeking to restructure its external debt under a broader debt treatment framework initiated in 2021.
The country reached a preliminary understanding with bondholders earlier this year on key financial terms, but the process has since stalled amid disagreements involving official bilateral creditors.
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The latest setback highlights the complexity of Ethiopia’s debt negotiations, which involve coordination between private investors and official lenders, including members of the Official Creditor Committee co-chaired by France and China.
Those official creditors have raised concerns that earlier proposals did not comply with the “comparability of treatment” principle, which requires that all creditor groups receive broadly similar restructuring terms.
The disagreement has contributed to delays in finalising a comprehensive debt deal, even as Ethiopia continues to grapple with limited fiscal space and external financing pressures.
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Some members of the bondholder committee have now formally warned that they may initiate legal proceedings in English courts to enforce their rights under Ethiopia’s 2024 international bond.
The group said it had previously issued a notice in April signalling the possibility of litigation, but argued that limited progress in recent negotiations had increased the likelihood of court action.
“Given the lack of tangible results from the recent restricted discussions, those members intend to press forward with legal claims in the English court to protect and enforce their rights under the 2024 Notes,” the committee said.
Legal action by bondholders would mark a significant escalation in Ethiopia’s debt restructuring process and could complicate efforts to reach a coordinated settlement across creditor groups.
Debt restructuring disputes involving sovereign borrowers often hinge on the balance between protecting investor rights and ensuring that countries undergoing financial stress are able to restore debt sustainability.
Ethiopia has been restructuring its external obligations as part of broader efforts to stabilise its economy, which has faced pressures from foreign exchange shortages, security challenges and pandemic-related disruptions.
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The outcome of the talks is being closely watched by international investors and multilateral institutions, as Ethiopia is one of several low-income countries seeking comprehensive debt relief under global restructuring initiatives.
Despite the tensions, market pricing on Ethiopia’s 2024 bond remained steady on Monday, trading at around 105 cents on the dollar, according to Tradeweb data, suggesting investors are still factoring in the possibility of an eventual negotiated settlement.
However, analysts warn that prolonged uncertainty or litigation could increase borrowing costs and delay Ethiopia’s return to international capital markets.
