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Zambia Hires Deutsche, Barclays for Planned Second Eurobond

Zambia hired Deutsche Bank AG and Barclays Plc as joint bookrunners for its planned second Eurobond, Ministry of Finance Permanent Secretary Felix Nkulukusa said.

Africa’s biggest copper producer extended the contract of the banks that arranged the $750 million bond it sold in 2012, Nkulukusa said today by mobile phone from Lusaka, the capital. Demand was 24 times higher than supply in that debt sale.

“We are looking at the projects that need to be funded and the market conditions,” which will determine how big the bond sale will be and when it will happen, said Nkulukusa.

Yields on Zambia’s debut Eurobond rose five basis points, or 0.05 percentage point, to 7.78 percent by 5:14 p.m. in Lusaka. The spread over African sovereign debt tracked by JPMorgan Chase & Co. has widened to 184 basis points from 81 basis points since the issuance in September 2012.

Fitch Ratings cut Zambia’s credit rating by one level to B in October, as the country’s budget deficit grew more than expected. That shortfall widened to 8.5 percent of gross domestic product last year, almost double government projections.

Zambia joins other African nations including Ghana and Kenya in selling dollar-denominated debt this year. Countries in the continent may sell as much as $5 billion in bonds by June, according to Johannesburg-based ETM Analytics Ltd.

Loan Canceled

The southern African nation plans to borrow 5.5 billion kwacha ($1 billion) in foreign program loans to partially fund the 2014 budget deficit, some of which will come from a Eurobond, Nkulukusa said. The amount will be determined by how much Zambia can raise from export-import banks and through concessional loans, he said.

The Finance Ministry canceled plans to raise as much as $250 million through a syndicated loan meant to fund last year’s deficit after talks with banks became “too complicated,” Nkulukusa said. The government had been in talks with Standard Chartered Plc and Citigroup Inc. over the deal since September, Fredson Yamba, secretary to the treasury, said at the time.

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