Fitch says Gabon averted default, regional bond swap not distressed exchange

By Colleen Goko

JOHANNESBURG (Reuters) -Gabon's recent swap of regional market bonds and bills did not amount to a distressed debt exchange, which means the country avoided a default, rating company Fitch said on Thursday.

Fitch, which rates Gabon CCC, eight notches below investment grade, said the exercise trims 2025 repayments by the equivalent of 1.4% of GDP this year, and 0.8% in 2026.

"The limited scale of the exchange relative to Gabon's financing needs means it was not designed to avert a traditional payment default," said the Fitch report.

The government said on April 28 that around 10 financial institutions had agreed to extend the maturities on 592 billion CFA francs ($1.03 billion) of treasury bills.

Fitch downgraded Gabon's rating to CCC in January based on heightened liquidity strains. The country raised money in a private placement of U.S. foreign debt in February of this year at a yield of 12.7%, the highest ever for an African Eurobond issuance.

Fitch estimates the budget gap will widen if Brent crude futures average $65 a barrel, below the country's fiscal breakeven of roughly $85.

"We believe Gabon is likely to return to an IMF programme in 2025, following the presidential election," Fitch said. "Nonetheless, Gabon’s record of obtaining planned funding from external lenders is poor, which has in the past contributed to the sovereign’s persistent liquidity issues."

($1 = 573.7500 CFA francs)

(Reporting by Colleen Goko; Editing by Sharon Singleton)

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