Ivory Coast Bond Rises on Speculation Politics May ‘Normalize’

Ivory Coast’s dollar-denominated bonds rebounded from a record low as analysts said the debt may be attracting some investors on speculation it will recover if a resolution can be found to the disputed Nov. 28 elections.

“Some investors are probably selling due to the imminent risk of default, also, some accounts are not allowed to hold defaulted paper,” Samir Gadio, an emerging-market strategist at Standard Bank Plc, said in an e-mailed reply to questions today. Others may “buy the bonds as they expect a price rebound in the medium term when the political situation ultimately normalizes.”

The $2.3 billion notes due 2032 rose 3.9 percent to 38.298 cents on the dollar, up from yesterday’s close of 36.875 cents, the lowest on record, as of 5:09 p.m. in Abidjan, according to data compiled by Bloomberg. The yield dropped 54 basis points to 16.659 percent. Earlier today the bonds fell 0.5 percent to 36.700 after Alassane Ouattara, internationally recognized as president, said his rival, Laurent Gbagbo, had no intention of making the missed $29 million interest payment due Dec. 31.

The bonds will probably recover if a stable government led by Ouattara takes control, according to the Economist Intelligence Unit and Stephen Bailey-Smith, a London-based emerging-market strategist at Standard Bank. Kenyan Prime Minister Raila Odinga, the African Union’s envoy in the crisis, said his meetings yesterday with Gbagbo and Ouattara failed to reach a settlement and “time is running out.”

The bonds are still down 39 percent from their record high of 62.875 cents on the dollar reached Oct. 14, before the first round of the elections. Ivory Coast has a 30-day grace period to make the missed interest payment.

London Club

“If they wanted to pay, they would have done so,” Ouattara said in an interview in Abidjan yesterday. Gbagbo’s administration has withdrawn 80 billion CFA francs ($163.4 million) from the country’s account at the Dakar-based Central Bank of West African States “to pay salaries, to pay mercenaries and to take money out of the country instead of paying what they have to pay to the London Club,” he said.

Thierry Desjardins, chairman of the London Club, an informal group of commercial banks that hold Ivory Coast debt, said in an e-mailed reply to questions no payment had been reached as of today.

If a stable government led by Ouattara were installed, “then you would expect it to reach the same price that it did just before the election,” Joseph Lake, an analyst at the EIU, said by phone from Minneapolis, Minnesota yesterday. “The price of the bond would rise quite rapidly.”

The election was meant to unify the country, divided after a civil war in 2002 into a government-controlled south and rebel-held north, and pave the way for economic growth and investment in the world’s biggest cocoa producer.

Ouattara, 69, is recognized as the election victor by the United Nations, the African Union, the regional central bank and France, its former colonial ruler. Gbagbo, 65, refuses to cede power, alleging fraud in parts of the country’s north.

-- With assistance from Pauline Bax and Olivier Monnier in Abidjan. Editors: John Kohut, Ana Monteiro.

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