Fitch Confirms Zambia’s Eurobond Buyback is Not a Distressed Exchange

Zambia’s plan to buy back its US$1.36 billion Eurobond does not form a distressed debt exchange (DDE).

Last Wednesday, the agency said that the tender offer did not aim to avoid a traditional payment default, the agency added that it trusted Zambia had the capacity to service the bond under both baseline and upside case scenarios.

If the bond can be redeemed in full, the sovereign would avoid additional costs that could be triggered under its upside case treatment. Fitch Ratings says there is a “high probability of the upside case being triggered. These factors support our view that this is not a DDE.”

Fitch said the upside case would be triggered if the IMF assesses Zambia’s debt-carrying capacity (DCC) as ‘medium’ instead of ‘weak’ for two semi-annual periods in a row between January 2026 and December 2028, or if exports and fiscal revenues outperformed IMF forecasts from December 2023.

The agency added that it is likely the DCC assessment would move from medium to week in the next three years supported by higher import coverage of reserves and real GDP growth.

Fitch highlighted that the tender offer expires on June 10, 2026, with settlement expected two days later. The statement read that “if at least 75% of the aggregate nominal principal outstanding is validly tendered, Zambia will exercise its clean-up call option to redeem all the outstanding Bond B notes. Zambia will use a USD600 million facility from the African Development Bank and if needed its own resources to finance the purchase.”