Rwanda Plans Debut Bond Sale of $400 Million to Lift Economy

Rwanda said it plans to raise $400 million in a debut sale of Eurobonds as the East African country seeks to accelerate economic growth.

The government appointed BNP Paribas SA and Citigroup Inc. as lead managers for the 10-year bond offering, Finance Minister Claver Gatete said in mobile-phone text messages today. The banks will arrange investor meetings in Asia, Europe and the U.S. starting Thursday, central bank Governor John Rwangombwa said in comments posted on Twitter.

“There will be strong interest” from investors that don’t track benchmark emerging-market indexes, Stuart Culverhouse, chief economist at investment bank Exotix Ltd., said by phone from London. It “will give them a bit of a yield pick up,” he said.

Less than 20 years after a genocide that killed about 800,000 Rwandans, President Paul Kagame is boosting transport links and energy supplies and promoting regional trade to lift the land-locked tea- and coffee-growing nation into a middle-income economy by 2020. Rwanda’s economy will expand by 8 percent this year, Kagame said in an interview last month, from 7.4 percent in 2011. That’s almost double the 4.2 percent forecast by the International Monetary Fund for neighboring Burundi and Uganda.

Privatization Push

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 the 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.

The government is also planning to sell 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, raising about 10 billion Rwandan francs ($15.7 million), according to the prospectus.

Rwanda is rated B with a stable outlook by both Standard & Poor’s and Fitch Ratings, five levels below investment grade at both companies. The nation’s inflation rate may accelerate to 7.5 percent by the end of the year, IMF said in a statement today, after easing to 3.25 percent last month from 4.79 percent in February, according to Rwanda’s statistics agency.

Kagame, who has been president since 2000, said last month in an interview in Miami that the government was planning to sell about 350 million euros ($457 million) in debt before the end of the fiscal year.

Bigger Offering

With Rwanda’s rating the bonds may be priced to yield 7 percent to 8 percent, said Exotix’s Culverhouse. Zambia, which is rated one level higher at B+ by S&P and Fitch, yields 5.4 percent on its $750 million of dollar bonds due September 2022, which it sold in September, according to data compiled by Bloomberg.

“It’s a shame it’s not a benchmark size,” Culverhouse said, referring to the $500 million cut-off needed to include the bonds in emerging market indexes compiled by JPMorgan Chase & Co. “Obviously they’d be paying more for a slightly bigger issue, but maybe the incremental cost of going from $400 million to $500 million would be offset if it was in the benchmark.”

Rwanda is joining other East African countries looking to sell their first Eurobonds this year. Kenya, the region’s largest economy, plans a sovereign bond by September, raising as much as $1 billion, Finance Minister Robinson Githae said last month. Tanzania, East Africa’s second-biggest economy, in February enlisted Citigroup to help prepare for a credit rating before issuing a maiden Eurobond by year-end.

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