Zambia Sells Debut $750 Million Eurobond to Boost Budget

Zambia, Africa’s largest copper producer, is selling its debut $750 million international bond to help fund its budget and invest in infrastructure.

The 10-year, dollar-denominated debt went on sale today at a final coupon of 5.625 percent, said Sashi Kumi, a credit and fixed-income trader at Nedbank Capital’s London-based unit, and according to a term sheet obtained by Bloomberg. Deputy Finance MinisterMiles Sampa didn’t reply to two e-mails seeking comment.

“Demand looks very good,” Kumi said in e-mailed reply to questions. “The Africa story, in general, is carrying favor with investors. People see great growth on the continent.”

Zambia joins other sub-Saharan African nations such as Nigeria, Ghana, Gabon, Senegal and Namibia that have sold international debt. The nation’s economy is forecast to expand 7.7 percent this year, reflecting strong growth in copper output and agricultural products other than corn, according to the central bank. Yields on Ghana’s Eurobonds maturing 2017 have dropped 170 basis points, or 1.7 percentage points, this year to 4.85 percent.

The notes were rated B+ by Fitch Ratings and Standard & Poor’s. The rating from Fitch, four levels below investment grade, matched the southern African nation’s sovereign rating, which has a negative outlook, Fitch said in a statement yesterday. Ghana, West Africa’s second largest economy, is also rated B+ by Fitch.

Rising Incomes

“We forecast a good performance for Zambia’s economy this year, with real per-capita gross domestic product increasing by slightly more than 5 percent,” S&P analysts, led by Christian Esters in Frankfurt, said in a statement today. “The economy has been buoyed by an exceptional maize harvest in 2011, high copper prices, and strong investment in the mining sector.”

Zambia may use proceeds from the sale for investment in infrastructure and general budget support, Fitch Ratings said yesterday. Fitch lowered the outlook on Zambia’s rating to negative from stable on March 1 because of a lack of certainty in government policy after Michael Sata was elected President in September last year.

“The credit looks relatively robust, strong growth, current-account surplus, low levels of public debt,” Yvette Babb, a Johannesburg-based emerging market strategist at Standard Bank Group Ltd., said in an e-mailed reply to questions. “There is a great appetite for Africa credit and a lack of supply.”

Zambia’s kwacha has gained 2.1 percent against the dollar this year, the second-best performer in Africa after Nigeria’s naira.

To contact the reporters on this story: Chris Kay in Abuja at ckay5@bloomberg.net; Renee Bonorchis in Johannesburg at rbonorchis@bloomberg.net; Katie Linsell in London at klinsell@bloomberg.net

To contact the editors responsible for this story: Paul Armstrong at parmstrong10@bloomberg.net; Vernon Wessels at vwessels@bloomberg.net

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