Mozambique Gains $500 Million-plus Secret Debt Cancellation

Mozambique today announced a negotiated deal with the major Swiss Bank UBS. It took over Credit Suisse after CS collapsed under a series of corruption scandals including the Mozambique secret debt. This ends only part of the case about the secret debt in the commercial count in London.

Economy and Finance Minister Max Tonela and Deputy Attorney General Angelo Matusse told a press conference today that the negotiation in London resolves a large part of the Credit Suisse loan. They refused to give details, but we estimate that more than $500 mn of the secret debt has been cancelled, which is a major victory for Mozambique.

The $2 bn secret debt was borrowed by three companies owned by the government, including the security services SISE. Initially in 2013 and 2014 $622 mn was borrowed by Proindicus, $535 mn by MAM, and $800 by Ematum. Of the Proindicus loan, $118 was lent by the Russian bank VTB and the rest by Credit Suisse, which in turn syndicated some of the loans (that is, sold the loans) to investment funds.

In case of dispute, these loans are all adjudicated in the London Commercial Court, and in 2009 legal cases were brought by Mozambique, by Privinvest, and by lenders. Prininvest is the company which received all the money, allegedly for projects in Mozambique, and which is accused of bribery and over-invoicing. What is common in such proceedings in London is that the courts rule on points of law, and then the parties often negotiate a deal in secret.

With accrued interest payments and penalties, the Proindicus loan is now probably around $900 mn. The trial is due to start today in London, but UBS and Mozambique have removed most of the Proinidicus loan from the case and announced a deal this morning. VTB and BCP (Banco Commerical Portuguese) are not part of the deal and are continuing with the court case.