Credit insurers have backed a “pioneering” loan from the African Development Bank (AfDB) that helped Zambia buy back US$1.36bn in sovereign bonds.
Texel Group, which brokered the policies for the AfDB, told GTR it was likely the first time the credit insurance market has insured a sovereign bond repurchase transaction “on a comprehensive non-payment basis”.
The Zambian government announced in May it had secured a US$600mn loan from the AfDB to buy back notes maturing in 2053, and later said it had secured near-unanimous support from bondholders. As part of the deal, the government has committed to earmark US$275mn to improve the country’s energy infrastructure.
Insurers on the transaction are Atrium Underwriters, Canopius Managing Agents, Chaucer Group, MS Amlin, Mosaic Insurance, MSIG USA, Liberty Specialty Markets, Brit Insurance, The Hartford and Mitsui Sumitomo Insurance Company (Europe), Texel said in a July 14 statement.
Shahin Samiy, a director at Texel, said the cover is in the form of a comprehensive non-payment insurance policy, but declined to say what portion of the loan is insured or disclose specific conditions.
He said the role of AfDB as lender “was integral to insurers’ willingness to support the transaction. The bank was able to crowd-in the insurance market due to its history of sovereign loan performance and proactive and focused engagement from the team.”
The bonds were issued in 2024 as part of Zambia’s debt restructuring following its sovereign default during the Covid-19 pandemic. The buy-back avoided a jump in the interest rate payable on the instruments from 0.5% to 7.5% if Zambia met certain debt sustainability metrics, Bloomberg reported last month.
Natalya Tyson, Mosaic Insurance’s head of public and development finance, political risk, described the deal as a “pioneering debt-for-development transaction, which unlocks significant investment in Zambia’s electricity sector and builds on our experience in debt conversion structures across emerging markets”.
“By combining sovereign risk mitigation with purpose-driven financing this transaction highlights the increasingly important role of insurance as a private capital mobilisation tool to enable innovative structures that strengthen sovereign balance sheets, while unlocking capital for sustainable development.”
Zambia exited an IMF programme in January after making what the organisation said was “substantial progress in restoring macroeconomic stability”. Fitch upgraded the country’s credit rating from “restricted default” to B- late last year.
