Zambia Risks Asset Attachments as Libya Debt Payments Missed

(Bloomberg) -- Libyan telecommunications company LAP GreenN is considering chasing after Zambia’s offshore assets after the southern African country defaulted four times on an order to pay $257 million in compensation for nationalizing a firm it invested in.

Zambia owes state-owned LAP GreenN more than $400 million including interest, and has defaulted on payments totaling about $220 million following a 2016 judgment in the nation’s high court, according to the Libyan Post, Telecommunication and IT Holding Co. which owns LAP GreenN. Yields on the nation’s dollar bonds climbed.

The company has “patiently” sought an amicable resolution, while Zambia has avoided and delayed paying, LPTIC Chairman Faisel Gergab said in an emailed statement. LAP GreenN “will pursue all avenues or recourse available to it should the defaults continue” and wants to recover the full amount due, he said. The country’s portfolio of international commercial assets is at risk of attachment, Gergab said.

Zambia’s Finance Ministry and presidency didn’t respond to requests for comment sent via email, phone and text message. Felix Mutati, who was replaced as finance minister in February, acknowledged the LAP GreenN debt to lawmakers in October, saying the government was “dealing with the matter of compensation.”

The compensation order dates back to LAP GreenN’s 2010 purchase of 75 percent of Zambia’s state-owned Zamtel Ltd., which the government seized 18 months later. The company’s plan comes after investors including Nomura International Plc and Bank of America Merrill Lynch expressed worries over Zambia’s dollar-debt levels, suggesting the totals may be higher than government’s estimates.

‘Red Flag’

The Finance Ministry says its official numbers showing $8.7 billion of foreign debt are accurate, and urges anyone with proof to the contrary to present it to the government.

The default “has to be a red flag” for investors, said Jay Auslander, a partner at Wilk Auslander LLP in New York who specializes in judgment enforcement and distressed debt litigation.

Moody’s Investors Service and Fitch Ratings Ltd. declined to comment. S&P Global Ratings didn’t respond to an emailed request. Zambia hasn’t defaulted bonds or loans since 1983, Moody’s said in January.

Yields on Zambia’s $1 billion of bonds due in April 2024 rose 19 basis points to 7.73 percent, the highest since April 11, at 9:14 a.m. in New York.

The missed payments following the 2016 order mean that LAP GreenN could pursue Zambia’s assets, Auslander said by phone. “This was a consent judgment, it’s fully enforceable.”

It could also amount to what’s known as a cross-default in Zambia’s prospectus for its $1.25 billion Eurobonds due July 2027, he said. That would mean investors holding 25 percent of the notes could declare the debt immediately payable, though it’s unlikely they would do so, he said.

The International Monetary Fund, which said in October that Zambia is at high risk of debt distress, is only aware of LAP GreenN’s claim through newspaper reports, it said by email.

©2018 Bloomberg L.P.

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