UBS and Mozambique settle decade-long $2B dispute over Credit Suisse loans

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UBS Group AG (SIX:UBSG) and the government of Mozambique have reached an agreement, resolving the long-standing dispute concerning Credit Suisse's involvement in a scandal over the financing of tuna fishing vessels. The development came just before the trial was due to start on Monday, putting an end to a case that began ten years ago. As part of the agreement, UBS and Mozambique have mutually released each other from all liabilities and claims related to the matter.

The case originated when Credit Suisse, along with several other banks, granted about $2 billion to Mozambique for projects aimed at creating a fleet for tuna fishing and a system for monitoring and protecting its coastline from piracy and illegal fishing. However, it was later discovered that hundreds of millions of dollars had disappeared from the disbursed funds. The Mozambican government accused the lenders of neglecting signs of theft and misconduct.

Following these revelations, the International Monetary Fund (IMF) and other foreign creditors stopped supporting Mozambique after learning that the local government had largely withheld facts regarding the state-guaranteed loans. According to reports, Mozambique sought $1.5 billion in damages in court, including money to compensate for economic losses caused by the IMF's withdrawal.

The settlement comes as a significant milestone for UBS, which acquired Credit Suisse in June this year. The Swiss bank stated that both parties were "pleased to conclude this protracted dispute arising from events that occurred ten years ago." It was reported that under the terms of the deal, UBS would not make any payments to Mozambique.

The $2 billion secret debt was borrowed by three companies owned by the government, including security services SISE. Initially in 2013 and 2014, $622 million was borrowed by Proindicus, $535 million by MAM, and $800 million by Ematum. Of the Proindicus loan, $118 million was lent by the Russian bank VTB and the rest by Credit Suisse, which subsequently syndicated some of the loans to investment funds.

Despite the settlement with UBS and Mozambique, VTB and BCP (Banco Comercial Portuguese) are not part of the deal and are continuing with the court case. The exact terms of the deal remain confidential due to the syndicated loans. However, it is estimated that more than $500 million in debt has been cancelled as a result of this agreement.

Mozambique's legal costs so far have amounted to $80 million and are expected to continue rising as the trial resumes. As the court case proceeds and further evidence is presented, it is anticipated that other deals may be negotiated.

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