International investors will likely have the opportunity to invest in another African eurobond issue after the Cote d’Ivoire marked sub-Saharan Africa’s return to the capital market with an oversubscribed $2.6 billion placement in late January.
The countries of sub-Saharan Africa have stayed away from the eurobond market over the past two years, which were marred by elevated inflation and rising interest rates. With Bank of America economists and other analysts now expecting central banks in major economies to start cutting interest rates, African sovereigns are seeing some opportunities for eurobond issuances.
Cote d’Ivoire’s eurobond aimed “mostly to repay debt coming due” in the next few years, says Charlie Robertson, head of macro strategy at asset manager FIM Partners.
Cote d’Ivoire, which is the world’s top producer of cocoa, received three times what it had offered. It placed $1.1 billion under a sustainable bond yielding 7.875% and maturing in 2033 in addition to another $1.5 billion in conventional bonds due by 2037 at an 8.5% yield.
Robertson expects at least one more African sovereign to issue a eurobond this year.
“Yes, there will be at least one other African issuer; the others, though, still can’t or won’t pay the relatively high cost of borrowing at this time,” he says.
The Nigerian government announced its keenness to issue a eurobond this year. Kenya also said that it will return to the international capital markets when conditions permit, with the IMF saying the East African nation was unlikely to default on $2 billion in eurobonds that will fall due this coming June.
David Hauner, managing director, head of Global Emerging Markets Fixed Income Strategy at Bank of America, says an overvalued US dollar likely to weaken against other major currencies, and a tapering off of interest rates. “Capital flows into emerging markets are driven by the dollar,” Hauner said during a presentation on the prospects for emerging markets this year. “We expect to see an improvement in capital flows into the region this year