Emerging Markets: Asia to be world’s wealthiest region
11 October, 2013Emerging Markets: Investors finally ready to look at Greece again
12 October, 2013Emerging Markets, World Bank editions, October 2013
Cote d’Ivoire is set to become the latest sub-Saharan African state to issue a sovereign bond – and perhaps the most daring in what has already been a landmark year.
Over the last 18 months Nigeria, Zambia, Ghana, Tanzania and Rwanda have joined North African states Egypt, Tunisia and Morocco in launching sovereign bonds, mostly with considerable success as investors have sought yield.
Several of those deals have been considered landmarks, none more so than the Republic of Rwanda, which made its debut in April with a $400 million 10-year bond and attracting a $3.5 billion order book – more than half the country’s entire GDP – despite being rated just B by Standard & Poor’s and Fitch.
But Cote d’Ivoire, also known as Ivory Coast, would perhaps be still more remarkable, since it is only two and a half years since the country defaulted on $2.3 billion of Eurobonds in February 2011. It did so amid civil war following the November 2010 elections, in which former president Laurent Gbagbo refused to give up power to opposition leader Alassane Ouattara, leading to fighting and the death of at least 3,000 people.
Since then, the country has resumed payments on the defaulted debt, and now appears to be ready to meet international investors again. The FT’s BeyondBrics blog quotes prime minister Daniel Kablan Duncan as saying the country is issuing bonds in CFA francs with an issue size of between $500 million and $1 billion. Since the CFA franc is pegged to the euro, the bond is likely to be issued in the euro market and targeted at least partly at international investors. Duncan is quoted as saying that this issue, expected to have a seven year maturity, could then be followed by a more mainstream international Eurobond issue next year.
One challenge the country may face is that market sentiment has changed dramatically since the Rwanda deal. Rwanda paid a yield of just 6.875% in April at a time when Greek debt was trading at 11%, pricing so tight that it began to fuel fears of a bubble in emerging market debt. When Nigeria, higher rated and with a much greater international standing than Rwanda, came to the markets in July, the tide had turned following Federal Reserve Governor Ben Bernanke’s comments on tapering. Nigeria paid almost the same yield for its 10-year paper as Rwanda did. Ghana is a closer comparison to Rwanda, having the same rating; its deal in July paid 8% for 10-year funds, despite Ghana being a repeat borrower and Rwanda a debut.
Cote d’Ivoire is not the only African country to be looking at the international debt markets, no matter how high the cost. Kenya is still understood to be planning a $1 billion sovereign debut by the end of the year; bankers expect the country to have to pay as much as 7.5% in order to do so. Senegal, too, announced a $500 million 19-year Eurobond in June, though it is now understood to be waiting for better market conditions in which to issue, having been told in August it would probably have to pay 8.75% to complete a deal. Senegal has, though, raised a CFA franc-denominated issue of the kind that Cote d’Ivoire is contemplating, paying 6.5% yield for a $100 million 10-year deal in July. Zambia, which was perhaps the poster child of emerging market demand when it paid just 5.6% for a $750 million 19-year bond in September 2012 – a lower cost of funds, at the time, than Spain – is also believed to be considering another deal.
