Ethiopia started a debut dollar bond issue, taking advantage of record demand for high-yielding African debt to fund electricity, railway and sugar-industry projects.
The $1 billion 10-year bonds will be priced to yield 6.625 percent, at the lower end of the 6.625 to 6.75 percent price guidance, according to a person familiar with the matter, who isn’t authorized to speak publicly and asked not to be identified. Kenya’s $2 billion of bonds due June 2024 yielded 5.90 percent at 1:08 p.m. in London.
“It is certainly a good time for them, market wise,” David Cowan, an Africa economist at Citigroup Inc., said at a conference in London. “Ethiopia is still one of the most closed economies, although it has a very strong developmental vision. They have to think about how they use that money to drive that development.”
African government and corporate Eurobonds sales this year beat 2013’s record $14 billion, Standard Bank said on Nov. 13. Sovereigns accounted for about 71 percent of issuance, according to the Johannesburg-based lender.
“It offers diversification and that’s what portfolio managers really like,” Lutz Roehmeyer, a money manager in Berlin overseeing $1.1 billion of emerging-market debt at LBB Invest, said by phone yesterday. “It’s good that we have more choice from Africa.”
Ethiopia was assigned its first credit ratings in May. Moody’s Investors Service rates it a non-investment grade B1 with a stable outlook, while Standard & Poor’s and Fitch Ratings awarded the East African country B, one grade lower.
Moody’s said the nation’s economic prospects, while favorable in the long term, were constrained by political risks and dependence on volatile agricultural commodities. Deutsche Bank AG and JPMorgan Chase & Co. are managing Ethiopia’s sale.
[BusinessWeek]