Rwanda Debut $400 Million Eurobond Yields at Bottom of Range

Rwanda raised $400 million in its debut dollar bond at the lowest end of yield guidance given to investors, according to a person with knowledge of the deal.

The 10-year Eurobond offering was priced to yield 6.875 percent, or 498.7 basis points more than the mid-swap rate, said the person, who asked not to be identified because the information isn’t public. Final guidance had ranged up to 7 percent, according to the person.

The East African country joins other sub-Saharan African nations including Nigeria, Zambia, Ghana, Gabon, Senegal and Namibia in selling international debt. Less than 20 years after a genocide that killed about 800,000 people, President Paul Kagame is boosting transport links and promoting regional trade with the aim of lifting the land-locked tea- and coffee-growing nation into a middle-income economy by 2020.

The Eurobond offering falls short of the $500 million needed to be eligible for inclusion in JPMorgan Chase & Co.’s emerging-markets bond index.

“Given that it’s not in an index this is a good yield for a single B credit debut,” Charles Robertson, global chief economist at Renaissance Capital, said in a phone interview today from London. “Investors get diversification, a pick-up in yield relative to Nigeria, still-low public sector debt ratios and exposure to arguably the most reformist government in Africa.”

Nigeria Yields

Rwanda’s government appointed BNP Paribas SA and Citigroup Inc. as lead managers for the offering, it said last week. The country is rated B with a stable outlook by both Standard & Poor’s and Fitch Ratings, five levels below investment grade.

Nigeria, Africa’s biggest oil producer and rated BB- by S&P and Fitch, has yields of 4.06 percent on its Eurobonds maturing January 2021, according to data compiled by Bloomberg. Ghana’s dollar bonds due October 2017, rated B by S&P, yielded 4.71 percent at 10:39 a.m. in London.

Zambia, rated at B+ by S&P and Fitch, sold $750 million of Eurobonds in September with a final yield of 5.625 percent.

Rwanda ranks eighth out of 185 countries for the ease of starting a business, according to the World Bank, and 52nd on its measure on the ease of doing business, the highest in sub- Saharan Africa after South Africa.

Rwanda will use $200 million to repay loans on the Kigali Convention Centre and a development plan for RwandAir, the national carrier, according to a copy of a prospectus obtained by Bloomberg News. Another $150 million will be spent completing the center and $50 million on a hydropower plant, according to the prospectus.

Stake Sales

The country plans to raise about 10 billion Rwandan francs ($15.7 million) by selling stakes in 13 state-owned companies focusing on agriculture, services, transport, banking and insurance industries by the end of the fiscal year of 2014 to 2015, according to the prospectus.

Rwanda is seeking funds to boost an economy that doubled to about $6.4 billion in the nine years through 2010 as it rebuilds from the 1994 genocide.

Rwanda’s economic expansion may slow to 7.5 percent this year from 7.7 percent in 2012, Paulo Drummond, the International Monetary Fund’s mission chief to the country, told reporters in the capital Kigali on April 16, with risks to growth including aid cuts and project delays. About 40 percent of the country’s budget is financed by grants, making up 11 percent of gross domestic product in 2010-2011, according to the World Bank.

Last year a United Nations group of experts accused Rwanda of supporting M23 rebels in neighboring Democratic Republic of Congo’s mineral-rich east, a charge Rwanda denies. Several countries cut aid to Rwanda because of the accusations. The government cut spending in the 2013 fiscal year by 54 billion Rwandan francs following reductions in aid.

Bond holders “will be paying some attention to Rwanda’s relations with the international community, that will still matter,” said Robertson. “Rwanda’s medium-term plan is to remove the need for support from the international community.”

To contact the reporters on this story: Lyubov Pronina in London at lpronina@bloomberg.net; Chris Kay in Abuja at ckay5@bloomberg.net

To contact the editors responsible for this story: Gavin Serkin at gserkin@bloomberg.net; Vernon Wessels at vwessels@bloomberg.net

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