Angola sells debut 10-year Eurobond at 9.5% yield

By bne IntelliNews November 5, 2015

Angola has raised $1.5bn from the sale of a 10-year Eurobond priced at 9.5% yield, the finance ministry said on November 5. It intends to use the proceeds to support infrastructure development projects.

The bond had an initial price guidance of 10%. Investor appetite was strong, with demand exceeding supply 5.8 times, allowing Angola to achieve a narrower yield of 9.5%.

“The transaction was the largest single-tranche inaugural issue sold by a sub-Saharan African sovereign with a non-investment grade rating,” the ministry said in a statement.

Sub-Saharan Africa’s third biggest economy and second largest oil exporter has been preparing to tap international markets since 2011. It launched its debut Eurobond after government revenues were severely impacted by the sharp drop in oil prices. Oil-related revenues accounted for 70% of total fiscal receipts in 2014 and an estimated 95% of exports.

On September 25, Fitch lowered Angola's sovereign rating by one notch to B+, citing rising government debt, a large current account deficit, falling reserves, and weakened growth. However, Fitch praised the authorities' timely response to the oil price shock, including tightening monetary and fiscal policy and allowing the exchange rate to devalue by 25% since January. Angola is rated Ba2 by Moody's and B+ by Standard & Poor's.

Last month, the IMF predicted that Angola’s GDP growth will slow from 4.8% in 2014 to 3.5% in both 2015 and 2016. The country’s finance ministry has projected growth to slow to 3.3% in 2016 from a downwardly revised 4.0% this year, with the oil price seen at $45 per barrel on average next year.

There have been only five Eurobond issuances by sub-Saharan countries this year, as the emerging economies have been pressured by declining commodity prices and weakening local currencies, which make repayments more expensive. Gabon, Ghana, Ivory Coast, Zambia, and Namibia have sold a total of $4.5bn in Eurobonds so far this year. Last year, the region issued a record $8.5bn in dollar-denominated international securities.

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