More appetite for African bonds in 2012

2012 could be an active year for African bonds and particularly eurobonds, judging by the 5.5 times oversubscription for the “Namibia 21”, the country’s debut $500 million, 10-year Eurobond. According to a recent story on Reuters, Florian von Hartig, head of debt capital markets at Standard Bank which was one of the lead arrangers,said it demonstrated the appetite for liquid African paper. He added that 2012 was likely to be active if the markets bear up: “I think Namibia is just another sign of how much African credits are in demand. The economy in Africa has been doing very well at times when the so-called developed world (has experienced) zero growth or even recession. Naturally, investors want to get exposure to an area where growth is steady so it ticks all the boxes.”
Zambia is among countries also considering a 10-year $500m Eurobond. Reuters quotes Stuart Culverhouse, chief economist at London-based broker Exotix as saying finding the best moment in turbulent markets will be key: “The external environment is driving a lot of considerations at the moment and therefore finding a window of opportunity in the market so the issuer can get the best possible terms will be a crucial factor.” He added that Zambia’s strong fundamentals, including increasing copper production, single-digit inflation and relatively low debt, made it an attractive issuer. “I think the underlying strengths are there to elicit investor interest, but the new government has to build on that and consolidate on that rather than reverse direction,” he said.
Kevin Daly, emerging market debt portfolio manager at Aberdeen Asset Management, which bought the Namibian Eurobond, said it depends on the terms of the issue: “There’s enough African names in the market to use as a pricing reference. When you look at current yields on Senegal 10-year bond it’s around 8.3/8.4%, so that’s a good starting point for them.”
Namibia’s Finance Minister Saara Kuugongelwa-Amadhila, said in an interview yesterday (15 Nov) on ABN digital; “We think that this does not only enable us to raise the funding that we need to finance our deficit, but it has enabled us also to realize the objective of providing a benchmark for future raising of funds by Namibia’s private sector, which is very important for the Namibian economy going forward.”

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