Ethiopia Starts Marketing Debut Eurobond for Projects Ethiopia raised $1 billion in a debut international bond issue today, taking advantage of record demand for high-yielding African debt to fund electricity, railway and sugar-industry projects.
The 10-year bonds 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 5.89 percent at 5:21 p.m. in London.
Africa’s fastest-growing economy and biggest coffee producer is joining issuers, including Ghana, Kenya, Senegal and Ivory Coast, who sold what Standard Bank Group Ltd. says is a record $15 billion of Eurobonds this year. Government and corporate issuers are seeking to benefit from investor appetite for higher returns before the Federal Reserve raises interest rates as soon as next year.
Ethiopia’s bond yield is “decent value for the deal given the limited knowledge and different nature of the Ethiopian economy and the challenges it faces compared to peers in the region,” Kevin Daly, a senior portfolio manager at Aberdeen Asset Management Plc, said by e-mail.
The country made a strong case for infrastructure development and financing needs at investor meetings, “which suggests they will be looking to come back to the market in near term,” Daly said.
Ethiopia will probably need to invest about $50 billion over the next five years, of which $10 billion to $15 billion may come from foreign investors, Finance Minister Sufian Ahmed said on Oct. 7. Most of the capital raised will be used to develop sugarcane plantations, a 6,000-megawatt hydropower dam on a tributary of the Nile River and the country’s railway network, he said.
“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.”
Band Aid
Almost 30 years after pictures of Ethiopian children with distended stomachs were used to raise money by Bob Geldof and Band Aid, the country is growing faster than any other African economy, at an average rate of 10.9 percent over the past decade, International Monetary Fund data shows.
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.
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. managed Ethiopia’s sale.
To contact the reporters on this story: Robert Brand in Cape Town at
rbrand9@bloomberg.net; Paul Wallace in London at
pwallace25@bloomberg.net; Lyubov Pronina in London at