MAPUTO, Mozambique—U.K. regulators are making
inquiries into Credit Suisse Group AG’s and Russian bank VTB Group’s handling
of hundreds of millions of dollars of debt the banks arranged for the purchase
of boats and military equipment for state-backed companies in Mozambique,
people familiar with the matter said.Meanwhile, the southern African country
has brought in a prominent debt-restructuring specialist to advise on whether
it should keep making payments on some related loans, other people familiar with
the matter said.The moves are the latest reactions to deals in a corner of the
world that left the country more burdened with debt and feuding with
international donors.The deals with three state-owned companies included $622
million in loans to buy military equipment, $535 million in loans to build a
shipyard and $850 million in bondsto buy a tuna-fishing fleet.Much of the
money raised for the tuna fleet was subsequently diverted to the military,
Mozambique has said in public budgetary documents. Those bonds nearly defaulted
and had to be restructured this year.
The U.K. Financial Conduct Authority is looking into
whether the banks violated regulations governing disclosures to investors
around the bond restructuring, people familiar with the matter said. While
Credit Suisse is a Swiss bank and VTB is Russian, both banks used their U.K. operations
to handle these bonds.Investors have said they weren’t told of the $1.15
billion in loans at the time of the bond restructuring. The FCA is gathering
information to see whether the banks failed to make necessary disclosures, the
people familiar with the matter said.
Representatives for Credit Suisse and the regulator
declined to comment. A spokeswoman for VTB said the bank wasn’t aware of any
investigations.
While the banks didn’t specifically call out the loans
to bondholders during roadshows to explain the restructuring, they had included
the borrowings in the calculation of Mozambique’s consolidated public debt that
they provided to investors during the exchange, a person familiar with the
offering has said. A Mozambique official also said the loans were included in
total debt figures provided in the bond documents.The Wall Street Journal
reported the existence of the loans in April. The International Monetary Fund
and donor countries suspended more than $200 million in payments to
Mozambique’s government after they came to light, complaining that they hadn’t
been disclosed.On May 23, Mozambique missed a payment due on the $535 million
loan and is negotiating with VTB to restructure the debt, the people said. The
other loan and the bonds had been arranged by VTB and Credit Suisse.
The government has brought in debt lawyer Lee C.
Buchheit of Cleary Gottlieb Steen & Hamilton LLP to advise on that process
as well as repayment of the other bonds and loans arranged by the banks, the
other people familiar with the matter said.One of the matters Mozambique is
seeking counsel on is whether it could refuse to repay the debts if they were
shown to be the product of any malfeasance on the part of the banks, the people
said. Spokeswomen for Credit Suisse and VTB declined to comment.Mr. Buchheit has advised on a number of debt
restructurings, including Greece’s. A spokeswoman for Cleary Gottlieb declined
to comment.The government said in April that it needs at least $180 million of
aid from international donors to help its population in areas affected by
drought and famine, according to the United Nations Office of the Resident
Coordinator.
By MATINA STEVIS—Matt Wirz contributed to this
article.
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