Gabon will use the proceeds of a $500 million Eurobond issued on Tuesday to develop infrastructure that will help wean the nation from its dependence on oil, Economy and Investment Minister Regis Immongault said.
“The Eurobond is for infrastructure -– energy, water, education and health facilities,” Immongault said in an phone interview on Tuesday from London. “It’s a strong signal of support for our reforms and economic policies. Investors recognize our proactive approach of dealing with the recent oil price volatility.”
Gabon, a former French colony, relies on oil for 52 percent of government income and almost 80 percent of export revenue, Raza Agha, an economist at VTB Capital Plc in London, said in a note on Tuesday. Authorities are trying to attract more tourists and develop deposits of manganese, which is used to make steel.
The country has struggled to cope with a 40 percent drop in crude prices over the past year. Its current budget is based on an oil price of about $45 a barrel, Immongault said. That’s about $20 below the current price.
The central African nation sold the Eurobonds due in June 2025 at a yield of 6.95 percent. Deutsche Bank AG, JPMorgan Chase & Co. and Standard Chartered Plc managed the offer, which was about six times oversubscribed and bought by about 210 investors, Immongault said.
Gabon is rated B+ by Standard & Poor’s and Fitch Ratings, four levels below investment grade, and Ba3 by Moody’s, which is three steps below. Yields on Gabon’s existing $1.5 billion of bonds due in December 2024 fell 5 basis points to 6.71 percent at 8:49 a.m. in London.
Economic growth will accelerate to 4.8 percent this year from 4.3 percent in 2014, Immongault said. The government’s ratio of debt to economic output will increase to 38 percent from 29 percent with Tuesday’s Eurobond, he said.
“Our strategy is to preserve the sustainability of public debt,” Immongault said. Another Eurobond next year “is not planned, but it’s possible,” he said.
(Earlier versions of this story corrected the maturity of Gabon’s dollar bond.)