Ethiopia has struck a preliminary deal with key bondholders to restructure its defaulted $1 billion international bond, the finance ministry said on Monday, moving ​the country closer to resolving a debt crisis that has dragged on for ​years.

The proposal calls for Ethiopia to issue an $880 million bond that ⁠will be repaid in installments with final payment due in 2029 at an interest ​rate of 6.15% - as previously agreed with bondholders. Ethiopia would also pay in full the ​three coupon payments it missed, totalling $99.375 million and a consent fee.

The deal also includes an instrument called a New Money Warrant, which gives bondholders the option to buy into a future Ethiopian bond ​of up to $1 billion at a market-linked interest rate. Ethiopia can also choose to ​pay them cash instead, up to a maximum of $90 million.

Ethiopia said the International Monetary Fund had signed ‌off on ⁠the warrant structure as consistent with its debt sustainability targets, and that the co-chairs of Ethiopia's Official Creditor Committee, the body representing bilateral lenders including China and France, gave their non-objection.

Tussle with bondholders

The agreement caps a lengthy restructuring process marked by back-and-forth with official ​creditors over the contours ​of a deal ⁠with bondholders.

Ethiopia defaulted on the bond in December 2023 after missing a $33 million coupon payment. A deal struck in January ​2026 collapsed when official creditors objected, and bondholders rejected a revised ​offer in ⁠late May.

The Ad Hoc Committee involved in the talks represents holders of roughly 45% of the outstanding notes.

Ethiopia said it plans to implement the deal through an exchange offer in ⁠the ​coming months, once remaining non-financial terms are agreed.

Ethiopia's bonds ​jumped more than 2 cents to bid at 107.625 cents on the dollar, their highest level since January, ​Tradeweb data showed .