Zambia just pulled off something that would have sounded absurd three years ago: buying back the entirety of a $1.36 billion Eurobond. The country that defaulted on its debt in 2020 has now secured enough bondholder participation to retire the notes entirely, clearing the 75% threshold that triggers a clean-up call provision on the remaining holdouts.
The tender offer, launched on May 29, initially ran into resistance. A creditor group holding more than 25% of the notes balked at the original terms, raising concerns about compulsory redemption mechanics and their impact on coupon payments. Then the government improved its offer around June 4-5, and sentiment flipped. By June 9, participation had surged past the critical 75% mark.
How Zambia funded the buyback
Here’s the thing about buying back $1.36 billion in bonds: you need cash. Zambia cobbled together the financing from two sources. The African Development Bank provided a $600 million loan, with the rest coming from Zambia’s own domestic resources.
The 2053 bond itself has an unusual origin story. It was created just last year, in June 2024, as part of Zambia’s Eurobond exchange under the G20 Common Framework. That exchange was the culmination of years of painful restructuring negotiations following the country’s 2020 default, which made Zambia the first African nation to default on its sovereign debt during the pandemic era.
The clean-up call mechanism
The 75% participation threshold matters because of a provision baked into the bond’s terms called a clean-up call. Once that level of bondholder support is reached, the issuer gains the right to compulsorily redeem the remaining notes. This means the holdout creditors who declined the tender don’t get to sit on their bonds indefinitely. They get bought out too.
This was precisely the sticking point that nearly derailed the deal. The initial creditor group that held more than 25% of the notes was worried about exactly this scenario, where accepting the tender might set a precedent that undervalued their holdings. Their resistance created a real risk that the 75% threshold would never be reached, leaving Zambia stuck with the full bond outstanding.
Markets responded accordingly. The bond price rallied approximately 4.3 cents to around 77.8 cents on the dollar after the improved offer gained traction.
What this means for investors and emerging market debt
Zambia’s successful buyback carries implications well beyond Lusaka. This is one of the first real test cases of whether a country can use the G20 Common Framework to restructure its debt and then actively manage the resulting liabilities rather than just sitting with them for decades.
Ghana, Ethiopia, and Sri Lanka are all at various stages of their own restructuring processes. If Zambia’s approach proves successful, multilateral development banks may find themselves fielding more requests for similar bridge financing arrangements.