Announcement of Consent Solicitation – Eurobond Zambia

THIS ANNOUNCEMENT DOES NOT CONSTITUTE A SOLICITATION OF AN OFFER TO SELL OR RECOMMENDATION TO PURCHASE THE NOTES REFERRED TO IN THIS ANNOUNCEMENT OR ANY OTHER SECURITIES. THE CONSENT SOLICITATION IS NOT BEING MADE, AND THIS ANNOUNCEMENT SHALL NOT BE DISTRIBUTED, IN ANY JURISDICTION IN WHICH SUCH SOLICITATION OF CONSENTS IS NOT IN COMPLIANCE WITH THE LAWS OR REGULATIONS OF SUCH JURISDICTION.

22 September 2020

ANNOUNCEMENT OF CONSENT SOLICITATION

U.S.$750,000,000 5.375 per cent. Notes due 2022

(Regulation S ISIN: XS0828779594, Common Code: 082877959; Rule 144A ISIN: US988895AA69, CUSIP: 988895AA6) (the “2022 Notes”)

U.S.$1,000,000,000 8.500 per cent.  Notes due 2024

Regulation S ISIN: XS1056386714, Common Code: 105638671; Rule 144A ISIN: US988895AE81, CUSIP: 988895 AE8) (the “2024 Notes”)

U.S.$1,250,000,000 8.970 per cent. Notes due 2027

(Regulation S ISIN: XS1267081575, Common Code: 126708157; Rule 144A ISIN: US988895AF56, Common Code: 126844646, CUSIP: 988895AF5) (the “2027 Notes” and, together with the 2022 Notes and the 2024 Notes, each a “Series” and together, the “Notes”)

issued by the Republic of Zambia (the “Issuer” or “Zambia”)

The Issuer announced today invitations to holders of the Notes (the “Noteholders”) to consider, and if thought fit, to pass resolutions as summarised under “Summary of the Consent Solicitation and the Proposal” below (the “Consent Solicitation”).

This announcement does not contain the full terms and conditions of the Consent Solicitation, which are contained in the consent solicitation memorandum dated 22 September 2020 (the “Memorandum”) prepared by the Issuer. Noteholders may obtain a copy of the Memorandum from Morrow Sodali Limited (the “Information and Tabulation Agent”), the contact details for which are set out below. In order to receive a copy of the Memorandum, a Noteholder will be required to provide certain confirmations as to his or her status as a Noteholder. Noteholders are advised to read the Memorandum carefully. Terms used and not defined in this announcement have the meanings given to such terms in the Memorandum.

The notices convening the Meetings to be held at the offices of White & Case LLP at 5 Old Broad Street, London EC2N 1DW at which extraordinary resolutions (the “Extraordinary Resolutions”) to approve the Proposal and its implementation will be considered and, if thought fit, approved (as further described in the Memorandum), have been published on the date hereof in accordance with the relevant terms and conditions of each Series. The following table sets out the times and date of each of the Meetings.

Meeting Time (London time)

Meeting Date

2022 Notes

10:00 a.m.

20 October 2020

2024 Notes

10:15 a.m.

20 October 2020

2027 Notes

10.30 a.m.

20 October 2020

 

In light of the ongoing developments in relation to Coronavirus (“Covid-19”), it may become impossible or inadvisable to hold the Meetings at the offices of White & Case LLP at 5 Old Broad Street, London EC2N 1DW. To the extent that the Issuer determines that it will not be possible to hold the Meetings at the offices of White & Case LLP at 5 Old Broad Street, London EC2N 1DW, the Issuer reserves the right to hold any Meeting by conference call or other electronic means (a “Virtual Meeting”).

In the event that the Issuer determines that a Virtual Meeting is required, the Issuer shall procure that those Noteholders who have indicated that they wish to attend the relevant Meeting in person will be provided with further details about attending the relevant Meeting. By electing to attend any Virtual Meeting, each such Noteholder shall be deemed to have fully understood and consented to any process governing the Virtual Meeting. Noteholders who have appointed the Information and Tabulation Agent (or one or more employees nominated by it) as proxy in respect of the Notes in relation to the relevant Meeting in a Voting Instruction (as defined below) will be unaffected if the relevant Meeting is held as a Virtual Meeting and will not be requested to take any further action.

Summary of the Consent Solicitation and the Proposal

Pursuant to the Consent Solicitation, as more fully described in the Memorandum, the Issuer has requested that the Noteholders of each Series approve, among other things, the matters set out below by Extraordinary Resolution:

1. the deferral by the Issuer of any interest payment due in respect of each Series of Notes between 14 October 2020 and 14 April 2021 (the “Standstill Period”) until 14 April 2021 (the “Deferral Of Interest”), provided that the payments of interest on 14 April 2021 shall be reduced by an amount equal to the Consent Fee (as described below) for each U.S.$1,000 in principal amount of the Notes of each Series. For the avoidance of doubt no interest shall accrue on any amount of interest deferred pursuant to the Deferral of Interest;

2. the irrevocable and unconditional waiver and authorisation of any breach or any alleged breach whatsoever of any other obligation under or in respect of the Notes, the Conditions, the Deeds of Covenant or the Agency Agreements which may be breached or may be capable of being breached by the threat of, in anticipation of, in connection with, or as a result of, the Deferral of Interest;

3.      the irrevocable and unconditional waiver and authorisation of any breach or alleged breach whatsoever of any obligation under or in respect of the Notes, the Conditions, the Deed of Covenant or the Agency Agreement which may have been breached prior to the Standstill Period or may be breached or may be capable of being breached for any reason during the Standstill Period, provided that such waiver shall be effective only until the end of the Standstill Period and that Noteholders will be at liberty to exercise such rights and take such proceedings as they are entitled to take in connection with a breach of or under the Notes, the Conditions, the Deeds of Covenant or the Agency Agreements (other than in respect of any breach or alleged breach in connection with the Deferral of Interest waived pursuant to paragraph (2) above), subject to, and in accordance with the Conditions, the Deeds of Covenants and the Agency Agreements; and

4.        all other such modifications to the Conditions, the Deed of Covenant and the Agency Agreement as are necessary for or expedient to effect the Deferral of Interest and the amendments, waivers and authorisations set out in paragraphs (1), (2) and (3) above.

Rationale for the Consent Solicitation and the Proposal

Zambia is currently faced with unprecedented liquidity constraints that have been exacerbated by the Covid-19 pandemic resulting in a substantial decline in revenues. A combination of declining revenues and increased unbudgeted costs caused by the Covid-19 pandemic have resulted in a material impact on the Government’s available resources to make timely payments on its indebtedness leading to increasing debt servicing difficulties.

Zambia has been engaging with the International Monetary Fund (the “IMF”) over the past few months to discuss IMF assistance to address the challenges the country is currently facing. IMF financial assistance is however subject to Zambia undertaking an appropriate debt management strategy to restore public debt sustainability as per IMF criteria. The authorities are currently assessing, with the assistance of their advisors and in close coordination with the IMF, Zambia’s overall public debt situation and the appropriate parameters of the debt strategy that will be required to restore debt sustainability as defined by the IMF debt sustainability framework for low-income countries.

In the meantime, given the urgency of the situation and the need for immediate debt service relief, Zambia has formally filed applications to the G20 Debt Service Suspension Initiative (the “DSSI”) and has entered into a memorandum of understanding with the Paris Club of lenders. Zambia has also decided, in line with the G20 recommendation, to seek the participation of its external commercial creditors in similar debt service suspension arrangements.

The Issuer is therefore requesting pursuant to the Proposal that Noteholders (i) approve the deferral of interest payments due on the Notes falling during the Standstill Period until the end of the Standstill Period, (ii) waive any event of default that may occur or be capable of occurring pursuant to this Deferral of Interest and (iii) waive any event of default that may have occurred or may in future occur or be capable of occurring as a result of Zambia’s accumulation of debt arrears or for any other reason, provided that the waiver referred to in (iii) shall only apply during the Standstill Period and shall not affect the ability of Noteholders to exercise their rights under the Notes thereafter.

The Proposal is intended as a first step to provide the Issuer and its advisors the necessary breathing time to finalize the debt sustainability analysis and to define the parameters of a debt restructuring strategy aimed at putting the debt on a sustainable trajectory, which is a pre-condition to IMF lending.

Investor Call

Zambia intends to conduct a call with investors at 12:30 p.m. (London time) on 29 September 2020 at which Zambia will present the challenges the country is currently facing, notably in respect of public debt sustainability, and the envisaged policy responses. Noteholders and other investors who would like to attend the presentation should register at https://news.whitecase.com/80/15706/landing-pages/blank-registration.asp . The deadline for registration is 12:00 p.m. (London time) on 29 September 2020.

Consent Fee Payment

As described in the Memorandum and subject to the conditions set out therein, in the event any Extraordinary Resolution is approved at any Meeting (or adjourned such Meeting) and the Proposal becomes effective in respect such Notes, the Issuer (or its nominee) shall pay to the relevant Noteholders a Consent Fee equal to U.S.$0.50 per U.S.$1,000 in principal amount of Notes of the relevant Series in respect of which a valid Voting Instruction was received approving the relevant Extraordinary Resolution on or prior to the Voting Deadline.

The Meetings

At the Meeting in respect of each Series, Noteholders will be invited to consider and, if thought fit, pass the relevant Extraordinary Resolution to approve the Proposal.

The quorum required at the relevant Meeting shall be:

·in respect of the 2022 Notes, one or more persons present and holding or representing at least two-thirds of the aggregate principal amount of the outstanding 2022 Notes;

·in respect of the 2024 Notes, one or more persons present and holding or representing at least two-thirds of the aggregate principal amount of the outstanding 2024 Notes; and

·in respect of the 2027 Notes, two or more persons present and holding 2027 Notes or being proxies or representatives and holding or representing in the aggregate not less than three-quarters of the principal amount of the 2027 Notes for the time being outstanding.

If within 15 minutes after the time fixed for the relevant Meeting a quorum is not present, the relevant Meeting shall be adjourned for such period, being not less than 14 days nor more than 42 days, and to such time and place as may be approved by the chairman either at or subsequent to the relevant Meeting. Notice of any Adjourned Meeting shall be given in the same manner as notice of the relevant Meeting, save that 10 days’ notice (exclusive of the day on which the notice is given and of the day on which the Adjourned Meeting is to be resumed) shall be given.

At any Adjourned Meeting, the quorum shall be:

  • in respect of the 2022 Notes, one or more persons present and holding or representing not less than one third of the aggregate principal amount of the outstanding 2022 Notes;
  • in respect of the 2024 Notes, one or more persons present and holding or representing not less than one third of the aggregate principal amount of the outstanding 2024 Notes; and
  • in respect of the 2027 Notes, two or more persons present and holding or being proxies or representatives and holding or representing in the aggregate not less than one third of the aggregate principal amount of 2027 Notes for the time being outstanding.

To be passed in relation to the Notes, the relevant Extraordinary Resolution must be passed at the relevant Meeting or relevant Adjourned Meeting, as applicable, duly convened and held in accordance with the provisions of Schedule 6 (Provisions for Meetings of Noteholders) to the relevant Agency Agreement by a majority of not less than three-quarters of the votes cast.

If passed, the relevant Extraordinary Resolution will be binding upon all Noteholders of the relevant Series, whether or not they were present or represented at the relevant Meeting and whether or not they voted at the relevant Meeting.

Noteholders should refer to the Memorandum and the Notices of Meeting for full details of the procedures in relation to the Meetings.

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