Rwanda’s $400m Eurobond will pay for power, planes and conferences

The first Eurobond issued by Rwanda, due to mature in May 2023, raised $400 million at 6.875%. According to this article in Bloomberg Businessweek, some of the money will be used to pay for building a 28-megawatt hydropower plant. The fund received some $3.5 billion in orders for the bond, which has a coupon of 6.625%, and Finance Minister Claver Gatete said on 24 April that 250 investors took part, according to a report in New Times.
Speaking at the World Economic Forum in Cape Town this week, Gatete said the hydropower plant will be fully operational by June 2014, with 14-MW already onstream by December. Last month he told reporters the rest of the money will be used to complete the building of Kigali Convention Centre and pay off some of state-owned RwandAir’s debt for its expansion programme.
According to local news reports in April, he said: “The bond, which was oversubscribed, signals that international investors have confidence in Africa beyond the usual commodity growth story. Rwanda’s intentions are to invest in infrastructure as part of building a modern, dynamic, service-based economy that is connected to international markets and that allows for rapid development.”
Bloomberg quotes him this week: “We didn’t just go to the market to look for any amount of money — we went for specific projects,” he said. “We have to be very careful when we go to the market and defining what the money will be used for.” But it could sell more debt if it needs to fund “high-impact” projects in tourism and energy.
“Very good news for the country…#Rwandabond, investors are honest judges on our country’s story and progress…they have said it,” the President wrote on his Twitter account @PaulKagame.
The bond has which has a coupon of 6.625%, and the issue was handled by BNP Paribas and Citigroup as joint lead managers, with legal work by London lawyers White & Case, according to their press release , which adds they advised 6 of the last 7 sub-Saharan African sovereign issues. A Rwandan Government delegation did roadshows in Boston, Frankfurt, Hong Kong, London, Los Angeles, Munich, New York and Singapore. Reuters quoted the fund managers saying it was “priced to perfection” and quoted Mark Bohlund, senior economist, sub-Saharan Africa, at IHS Global Insight: “If you want to have exposure to sub-Saharan Africa but you’re worried about a drop in commodity prices and you want to rebalance your portfolio Rwanda is a good investment.”
The yield on the 6.875 percent dollar bond due in May 2023 was little changed at 6.9 percent by 8 May. it is traded on the Irish Stock Exchange. Fitch Ratings rated long-term foreign and local currency rating at B, five levels below investment grade. Standard & Poor’s also gave B with stable outlook. Rwanda’s economy grew by 8.2% for the last 5 years but the Government targets an average 11.5% annual growth in the Economic Development and Poverty Reduction Strategy II (EDPRS II).
The latest IMF mission commented [link] on 16 April: “The economic outlook for 2013 has weakened somewhat since the 5th review. The growth of the construction and service sectors is expected to slow down in response to tighter economic policies. This will be partly offset by stronger growth in agriculture (food crops), for which the first harvest of the year was good, and an acceleration in foreign-financed investment projects. Growth is expected at 7.5% for the year. Downside risks predominate, stemming from possible cutbacks in aid, delays in project implementation, and a more challenging global environment. Inflation is expected to rise to 7.5% by end-2013.”

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