Angola Suspends Rating Plan, May Sell $2 Billion in Local Bonds Instead

Angola suspended plans to seek a credit rating from agencies before an international bond sale and will instead sell as much as $2 billion of government bonds locally, a Finance Ministry official said.

Angola held several meetings with Moody’s Investors Service, Standard & Poor’s and Fitch Ratings without reaching an agreement, the official said today from the capital, Luanda. He declined to be identified in line with the ministry’s policy.

The southern African nation intends to sell between $1.5 billion and $2 billion of government bonds and will start doing so as soon as possible, he said.

Angola’s decision not to seek a rating “sends the wrong signal to investors if the country’s eventual goal is to sell a foreign-currency bond,” David Aserkoff, a strategist at Exotix Holdings Ltd., said by phone from London. “They’d pay significantly lower interest if they actually had a rating.”

Angola had planned to sell as much as $4 billion of an international bond to help pay for government expenditure after the decline in the oil price from its July 2008 record crimped state revenue. The country derives 80 percent of its income from crude exports.

The nation’s government had planned a two-part sale of $4 billion of debt in December and June and JPMorgan Chase & Co. would handle the placement, Economy Minister Manuel Nunes Junior said Nov. 5.

Kwanza Bonds

On April 15, Finance Minister Carlos Lopes said the country had scaled back its initial plan and intended to seek between $1 billion and $2 billion.

Angola started selling kwanza-denominated bonds in April last year to fund spending as the global economic crisis cut its earnings from commodities. The yield on 182-day central-bank bills rose to 24 percent at an auction on April 14, from 10.8 percent in August last year.

“They would be able to raise that amount of money domestically as long as they allow foreign participation in the local T-bill market,” said Aserkoff. International investors are not permitted to own treasury bills and can’t make deposits with Angolan banks, according to Aserkoff.

“They’ve tried to limit the amount of hot money inflows into their market” because of the currency risk it poses if that money flows out again, said Aserkoff.

Angola discontinued fixed exchange rates for the kwanza in October last year after a decline in oil revenue reduced the central bank’s ability to defend the currency. Since then, currency has weakened 17 percent to 93.1985 to the dollar as of 5:05 p.m. in Luanda.

Angola, which is rebuilding infrastructure ravaged by a 27- year civil war that ended in 2002, has delayed payments to construction companies including Brazil’s Odebrecht SA and Portugal’s Grupo Soares da Costa SGPS SA.

The southern African nation owed four Brazilian construction companies $2 billion as of October last year, Sao Paulo-based Valor Economico reported.

To contact the reporter on this story: Candido Mendes in Luanda via Johannesburg on pmrichardson@bloomberg.net.

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