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Angola Rated B+ by S&P, Fitch; Dollar Bond May Follow

Angola received credit ratings from Standard & Poor’s, Fitch Ratings and Moody’s Investors Service that put it on par with Nigeria, Lebanon and Belarus, and paved the way for a planned sale of international bonds this year.

The southern African nation’s creditworthiness was rated at B+ by S&P and Fitch, four levels below investment grade, according to statements by the ratings companies today. Moody’s assigned an equivalent ranking of B1.

“The ratings are a little bit better than we anticipated, but it’s probably justified given Angola’s low external debt levels,” Stuart Culverhouse, chief economist at Exotix Ltd., said by phone from London. Angola’s external debt to gross domestic product ratio was about 22.8% in 2009, he said, citing data from the International Monetary Fund.

Angola may issue between $1 billion to $2 billion of international bonds this year, scaling back earlier plans to sell as much as $4 billion of the debt without a credit rating, Finance Minister Carlos Lopes said on April 15. The country, which vies with Nigeria to be the continent’s biggest oil producer, relies on crude exports for more than 80 percent of its revenue.

Angola will “analyze its financial needs” before deciding whether to issue international bonds, Economy Minister Manuel Nunes Junior said by telephone from the capital, Luanda, today. Nunes declined to say when Angola may issue international bonds, the amount it seeks to raise, or the rate it would be willing to pay investors.


The country’s ratings “are satisfactory and reflect the good performance of the Angolan economy,” Nunes said.

Ghana’s $750 million international bond, which has an equivalent B+ rating at S&P and Fitch, yielded 7.4 percent as of 1:24 p.m. London time. The bond pays a fixed coupon of 8.5 percent. The yield on 182-day Angolan central-bank bills was 22.97 percent at an auction on May 13, compared with 10.88 percent in August last year.

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. Angola’s former colonial ruler Portugal will lend 500 million euros ($616.2 million) to Angola so the country can settle debts to Portuguese companies, a Portuguese Finance Ministry spokeswoman said April 27.


The country’s ratings “reflects the balance between steadily improving oil revenues and favorable debt levels, contrasted with a weak macro-economic management,” said Laura Maree, an analyst at Rand Merchant Bank in Johannesburg. “There are still some structural rigidities in Angola.” The price of oil has more than doubled since reaching an almost five-year low on Dec. 18, 2008.

Fitch and Moody’s assigned positive outlooks to their ratings for Angola while S&P gave the country a stable outlook.

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, the currency has weakened 16 percent to 92.6105 per dollar according to Bloomberg data.

The kwanza is likely to trade at an average level of about 90 to the dollar for the rest of this year, RMB’s Maree estimates.

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