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Report: Investors believe Mozambique bond exchange's arrangers withheld key information

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Report: Investors believe Mozambique bond exchange's arrangers withheld key information

Investors in Mozambique's newly exchanged bond areconsidering a legal action against PAO VTB Bank and Credit Suisse Group AG for allegedly withholding crucialinformation, Thomson Reuters' IFR reported April 27.

Investors holding more than 80% of the government-guaranteed$850 million bond issued by tuna-fishing company Ematum, due in 2020, exchangedthe debt for $726 million in bonds issued directly by Mozambique in a dealarranged by Credit Suisse and VTB. The $726 million debt is due tomature in 2023.

Investors claim that they did not know that Credit Suisseand VTB had issued loans of $620 million and $520 million, respectively, tostate-owned Mozambique entities, guaranteed by the government, according to thenews source. These loans are due before the new bond matures.

The bond exchange prospectus does note Credit Suisse'slending relationship with a wholly owned state entity whose obligations havethe benefit of a guarantee from Mozambique, but without any details of the sizeor maturity profile of the specific loan. The prospectus also highlighted thatthere may be conflicts of interest involving the joint dealer-managers andother firms associated with the exchange.

VTB Bank denied any "undisclosed conflict ofinterest" in a statement to the newswire, while Credit Suisse declined tocomment on the matter.