Rwanda Said to Cap Bond at $400 Million With 7% Yield

Rwanda will cap its debut dollar bond sale at $400 million, with final yield guidance given at 6.875 percent to 7 percent, according to a person with knowledge of the offering.

The 10-year Eurobond offering by the East African nation is expected to price tomorrow following investor meetings in Asia, Europe and the U.S. that started April 18, said the person, who asked not to be identified because the information isn’t public. The government appointed BNP Paribas SA and Citigroup Inc. as lead managers for the offering, it said last week. Rwanda is rated B with a stable outlook by both Standard & Poor’s and Fitch Ratings, five levels below investment grade.

Rwanda joins other sub-Saharan African nations including Nigeria, Zambia, Ghana, Gabon, Senegal and Namibia in selling international debt. Less than 20 years after a genocide that killed about 800,000 people, President Paul Kagame is boosting transport links and promoting regional trade with the aim of lifting the land-locked tea- and coffee-growing nation into a middle-income economy by 2020.

“The price guidance is broadly in line with market expectations and probably represents fair value given the country’s fundamentals and the size of the issue,” Samir Gadio, a London-based emerging markets strategist at Standard Bank Group Ltd., said in an e-mailed reply to questions today.

Index Inclusion

The offering would need to be at least $500 million to be eligible for inclusion in JPMorgan Chase & Co.’s emerging-markets bond index.

“A benchmark issue would have reduced the external funding cost,” Gadio said. “But even in this case we suspect the Rwandese bond would have still been placed at a premium to other mainstream sub-Saharan Africa sovereign Eurobonds given the weaker external and fiscal metrics.”

Ghana’s dollar bonds due October 2017, also rated B by S&P, yielded 4.723 percent at 3:08 p.m. in London, according to data compiled by Bloomberg. Zambia, rated one level higher at B+ by S&P and Fitch, sold $750 million of Eurobonds in September with a final yield of 5.625 percent.

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 country plans to raise about 10 billion Rwandan francs ($15.7 million) by selling 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, according to the prospectus.

Economic Expansion

Rwanda is seeking funds to boost an economy that doubled to about $6.4 billion in the nine years through 2010 as it rebuilds from the 1994 genocide.

Economic expansion may slow to 7.5 percent this year from 7.7 percent in 2012, Paulo Drummond, the International Monetary Fund’s mission chief to the country, told reporters in the capital Kigali on April 16. The main risks to growth include aid cuts and project delays, he said. About 40 percent of the country’s budget is financed by grants, making up 11 percent of gross domestic product in 2010-2011, according to the World Bank.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE