Zambia sold on July 23 a $1.25bn Eurobond, below an initially announced target of between $1.5bn and $2.0bn despite ample demand, as the yield spiked to 8.97%. The Eurobond has an 11-year average life with repayments in 2025, 2026 and 2027, local media reported, quoting an official statement. The issuance was in excess of two times oversubscribed.
The coupon rate of 8.97% is above the yields achieved at Zambia’s two previous issuances and also well above the yields achieved by fellow sub-Saharan African issuers this year. However, the country’s deputy finance minister Christopher Mvunga said the rate was competitive and claimed that the time was appropriate to tap international markets as interest rates are anticipated to rise globally in the near future.
“As the case has been in the past, the funds will be used in infrastructure related projects in the area of road, energy, education, health, water and transport sectors,” Mvunga was quoted as saying by Lusaka Times. “The fiscal consolidation measures outlined to the investors in the presentations will strictly be adhered to,” he added.
Africa’s second biggest copper producer has been troubled by worsening fiscal position, as the drop in copper prices hit revenue and spending grew more-than-projected. This led to a rating downgrade by S&P earlier this month, as the agency revised up its forecast for the country’s 2015 budget deficit to 10% of GDP from previously expected 6% and warned that the likelihood of deep-rooted fiscal reform that could tackle weakening public finances is limited in view of the upcoming elections, scheduled for September 2016.
Zambia sold its debut $750mn 10-year Eurobond in September 2012 at a yield of 5.625% after attracting bids worth more than USD 11bn. In April 2014, it sold a $1bn 10-year issue, which bears an annual coupon of 8.625% after drawing bids worth USD 4.25bn.
Ivory Coast sold in February a $1bn issue at a yield of 6.625% with demand reaching $4bn. Gabon sold in June a 10-year $500mn Eurobond at a yield of 6.95%.
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