Gabon Sells $1.5 Billion of Eurobonds in Debt Exchange

Gabon issued $1.5 billion of dollar bonds as part of an exchange and buyback of existing debt, adding to record issuance by African nations from Nigeria to Rwanda this year.

The securities due 2024 were priced to yield 6.375 percent, Bloomberg data show. The central African oil producer, which is selling notes abroad for the first time since 2007, raised $890 million of new cash in the offering, according to a person familiar with the transaction who asked not to be identified because he wasn’t authorized to speak publicly.

Dollar-bond sales from African governments and companies rose to a record $9.68 billion this year from $6.04 billion in 2012, Megan McDonald, Standard Bank Group Ltd.’s head of debt primary markets, said Oct. 31. Gabon, which depends on oil for 45 percent of its gross domestic product, has been buoyed by rising public investment, and economic growth is expected to quicken to 6.8 percent in 2014, according to the International Monetary Fund.

“They have the potential to attract direct investment into other natural resources,” Richard Segal, the London-based head of international credit strategy at Jefferies Group Inc., said by phone today. “Gabon is a good story.”

Revised Guidance

The 6.375 percent coupon is less than the 7.875 percent Ghana paid in its July offering and the 6.625 percent Rwanda got in an April issue. Ghana, which replaced $250 million of existing debt during its $1 billion sale, is seeking approval for a third Eurobond, the Finance Ministry said Nov. 25. Senegal may also issue $500 million of 10-year securities, the International Monetary Fund said in June.

The minimum yield on Gabon’s offering was first set at 6.125 percent, according to a Dec. 2 statement sent by Citigroup Inc., Deutsche Bank AG and Standard Chartered Plc, the arrangers for the sale.

Kenya, Zambia, Angola and Mozambique are among governments planning Eurobond offers as African nations seek to replace existing debt or fund infrastructure such as road, rail and energy with debt before the Federal Reserve curbs stimulus that has boosted demand for emerging-market assets.

“The transaction is the first of its kind in the region,”

Nicholas Samara, the London-based vice president for Central and Eastern Europe, Middle East and Africa debt capital markets, at Citigroup, said by phone today. The proceeds will be used on infrastructure “which is the theme in Africa.”

20% Poverty

Borrowing costs for African nations have increased 158 basis points, or 1.58 percentage points, this year, JPMorgan Chase & Co. indexes show.

Gabon is considered a middle-income nation with per capita-income of more than $11,000 even as a third of its citizens live in poverty and 20 percent of working-age people don’t have jobs, according to the IMF.

The country in September lowered its 2013 growth forecast to 6.1 percent from an earlier projection of 7.1 percent and compared with a rate of 5.3 percent last year. Tullow Oil Plc and Total SA are among companies operating in Gabon.

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