Sovereign default watch, Ivory Coast edition

January 4, 2011
My headline, in April 2010, less than eight months ago, said "Ivory Coast’s bond exchange gets it exactly right". Clearly, I spoke too soon:

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My headline in April 2010, less than eight months ago, said “Ivory Coast’s bond exchange gets it exactly right”. Clearly, I spoke too soon: it seems that they should have simply held off until after the elections.

Ivory Coast’s Eurobonds sank to a record-low 40 cents on the dollar after the world’s biggest cocoa producer missed a $29 million interest payment amid a fight for political control of the West African nation.

Neither of the claimants to the presidency is talking about this issue, although the winner of the election, Alassane Ouattara, says that there isn’t any money left, and his predecessor, Laurent Gbagbo, has been cut off from state accounts.

The chairman of the London Club, Thierry Desjardins, is putting on a brave face, saying that “there is a willingness from the Ivorians to pay” — but it’s unclear who if anybody he’s talking to, or how he can have any good reason to believe that.

If the chaos in Ivory Coast continues past February 1 without the $30 million coupon being paid, the country will have defaulted within a year of restructuring, which would surely be some kind of record. But let’s get real here about this kind of thing:

Ivory Coast’s debt has already been restructured twice because of past defaults, and any repetition would leave it frozen out of international debt markets.

Ivory Coast is already frozen out of international debt markets; there’s no way that it will be able to issue debt in the foreseeable future, whether it makes this particular coupon payment or not. Even if Ouattara takes power and there’s no civil war and the best-case scenario works out, he still won’t be able to issue an international bond for the duration of his term in office. Which, admittedly, hardly gives him an enormous incentive to get that $30 million coupon paid this month.

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