Exclusive: JPMorgan returns $200 million in collateral to Angola following a bond recovery
The finance ministry reported that Angola received $200 million of the collateral it had to send to JPMorgan (JPM.N) in May, opening a new tab earlier in the year, as the price of the bond recovered, relieving financial pressure.
A $1 billion, one-year derivative deal called a total return swap, backed by $1.9 billion in government dollar bonds, was agreed upon by JPMorgan and Angola in December.
After a steep drop in oil prices following tariff unrest affected the value of Angolan bonds offered as collateral, JPMorgan wanted further security from the Southern African crude oil exporter in early April.
“The sum paid in accordance with the margin call can be returned to the State thanks to the improvement in the price of Angola’s Eurobonds. The finance ministry told Reuters that the money was received in May and that the refund had already occurred.
JPMorgan chose not to respond.
When the margin call was triggered in early April, the collateral bond price for the JPMorgan loan dropped from 100 cents on the dollar at the end of March to 86 cents during the selloff before rising back to its March levels.
According to traders, it was priced at 100 cents on Wednesday.
The withdrawal of oil subsidies has led to a rise in fuel prices, which has generated violent protests and a declining development prospects for Angola, which is heavily indebted to foreign creditors, particularly oil-backed loans from China.
COMPLEX EQUIPMENTS
The Wall Street bank gave the government two financing tranches of $600 million and $400 million as part of the total return swap agreement with JPMorgan. The nation did not make any money from the $1.9 billion in newly issued bonds that served as collateral for the transaction.
The bond is listed globally and is scheduled to mature in 2030. Its price is typically quoted in accordance with changes in the overall market and other Angolan bonds.
Total return swaps are rarely utilized in sovereign funding since they are viewed as intricate and dangerous financial products.
Concerns that highly indebted, low-rated African nations are increasingly relying on “off-screen” transactions such as bank loans, private placements, and derivatives, which may present difficulties like margin calls and rising interest rates, have been heightened by Angola’s JPMorgan total return swap.
According to data from the African Development Bank, Africa’s debt has skyrocketed to over $1.8 trillion, resulting in three national debt defaults in the last four years and unorthodox financing arrangements as countries try to survive.
Amid calls for increased funding for infrastructure projects like roads, Angola’s state has been spending less on social programs, raising worries.
Citing weaker crude oil prices and more stringent external financing requirements, the IMF lowered Angola’s first growth forecast for 2025 from 3% to 2.4%.
