Namibia is selling a debut $500 million international bond to help finance its budget deficit, according to three people familiar with the transaction.
The 10-year dollar-denominated securities are being sold to investors in Europe and the U.S., said an official from the central bank, who declined to be identified because the sale hasn’t been completed. The bond may be priced to yield between 5.75 percent and 6 percent, according to an investor and banker, who declined to be identified for the same reason.
Namibia, the world’s biggest miner of offshore diamonds and the fourth-largest producer of uranium, has a credit rating of BBB- from Fitch Ratings and Baa3 from Moody’s, the lowest investment-grade levels. The southern African nation, which borders South Africa, Botswana and Angola, follows Nigeria, sub- Saharan Africa’s second-largest economy, which sold its first dollar-denominated debt in January.
“It sounds relatively attractive compared to African peers,” Stuart Culverhouse, the chief economist at investment bank Exotix Ltd., said in a phone interview from London today. “It’s a relatively unknown name and may have to stimulate interest through the pricing.”
Bids received for the bond exceeded the amount on offer by six times, according to the investor. Barclays Capital and Standard Bank Group Ltd. are selling the bond on behalf of the government, according to the banker.
The government is raising funds to help finance a budget deficit that’s forecast to widen to 9.8 percent of gross domestic product in the year through March 2012 from 7 percent last year.
Namibia has a higher credit rating than sovereign debt issued by sub-Saharan African nations, excluding South Africa. Gabon’s dollar-denominated bonds due 2017 yielded 5.117 percent today, while Ghana’s $750 million of 8.5 percent international bonds due 2017 yielded 6.152 percent. Nigeria’s $500 million Eurobonds due 2021 yield 5.965 percent, according to data compiled by Bloomberg, at 3:52 p.m. in London.
Namibia has “a similar rating to South Africa and obviously very closely tied to the South African economy,” said Culverhouse. “If you look at it from that perspective it’s about 200 basis points over the equivalent South African Eurobond. From both sides of the argument, it’s a fairly attractive deal.”
Kenya, Angola, Zambia and Rwanda are also planning to tap international debt markets to finance rail, power and other infrastructure projects.