London (UK) – 17 July 2014 – FT -
Ivory Coast has attracted almost $5bn of orders in its return to bond markets just three years after default, in the latest sign of increased investor demand for frontier market debt.
The 10-year, $750m bond, which is expected to price at a yield of 5.625 per cent, was more than six times subscribed – attracting an overall book of $4.75bn.
The yield on the bond is set to be lower than that of Kenya’s record-breaking $2bn bond in June.
African debt markets have grown rapidly in the past two years as governments and companies move to take advantage of low global interest rates and strong investor appetite for higher yields.
“Investors are increasingly keen to invest in frontier markets, but when it comes to Africa, they are also increasingly eager to address each country on its own individual merits rather than seeing the continent as an undifferentiated whole,” said Nicholas Samara, debt capital markets banker at Citi, one of the banks involved in the sale.
“In the case of the Ivory Coast, the country has been reaping peace dividends since its return to political stability.”
Ivory Coast suspended payments on a $2.3bn bond in 2011 following a period of intense political unrest. The bond, issued in 2010, was itself part of a restructuring of securities originally issued in 1998, which the country had defaulted on.
However, the country – the world’s leading cocoa producer – has since returned to a period of political stability under president Alassane Ouattara.
The International Monetary Fund forecasts that the Ivory Coast’s economy will grow 8.2 per cent in 2014 – the fourth-highest predicted growth in Africa.
“If you want to turn a country into an emerging market by 2020, you need to have a high rate of growth, and that needs huge investment,” said Daniel Kablan Duncan, prime minister and finance minister of the Ivory Coast.
He added that the proceeds of the bond would be mainly used to finance public investment, especially in fields such as healthcare and education.
Other “frontier markets” with a history of default have recently announced a return to the bond market. Ecuador, which defaulted five years ago, issued a $2bn bond last month.
“I think that you have seen people become more comfortable with frontiers,” said Stuart Culverhouse, head of research at frontier markets specialist Exotix. “These markets have benefited from people thinking more mainstream emerging markets are fragile.”
Citi, BNP Paribas and Deutsche Bank worked on the deal.