Africa

Emerging market borrowers seem to be enjoying unfettered access to the capital markets, but many are now questioning whether this Covid-induced debt spree can be sustained in the long run. With fiscal support packages likely to be needed in 2021, investors will be sifting through EM governments to see which will be able to borrow and which will be left behind, writes Mariam Meskin.

The coronavirus pandemic means many parts of the US are experiencing an unusual festive period. But emerging markets sovereigns broke another Thanksgiving tradition by flooding primary bond markets with new deals on what is usually a quiet week for new issues — even as levels of stress are rising sharply at the riskier end of the asset class. Oliver West and Mariam Meskin report.

Rating: Ba3/B+

CEEMEA sovereign borrowers extended their last minute funding spree this week with Romania joining Ivory Coast in the primary bond market.

The Ivory Coast has sparked life into what has been a bleak year for sub-Saharan African bond issuance. Most sovereigns have turned to the official sector to support them throughout the coronavirus crisis as a result of being priced out of the international debt capital markets, bankers said.

Millicom International Cellular has sold a 5.2% stake in Helios Towers, the Africa-focused telecommunications infrastructure company, through an accelerated bookbuild.

South African pulp and paper company Sappi has tapped the equity-linked market for financing with a new five-year R1.8bn ($120m) convertible bond.

Zambia has become Africa’s first sovereign to default since the coronavirus started, after it failed to make payments on its Eurobonds. The heavily indebted country now faces a rocky path to debt restructuring, market sources said.

South African commercial landlord Growthpoint Properties has sold R4.3bn ($275m) of new shares to fund deleveraging, including repaying debt used to finance its acquisition of Capital & Regional at the end of 2019.

Egypt, which has already entered international debt markets twice this year, is on its way to debuting in the sukuk market following cabinet approval for an Islamic financing bill. The sovereign raised its debut syndicated loan in September that included an Islamic tranche, which bankers said was a fitting prelude to a sukuk.

Zambia is headed for a default next week, as GlobalCapital understands the bondholder committee responsible for 40% of the sovereign Eurobonds will reject the deferral request in a vote next week.

Corporate issuance volumes across CEEMEA have dropped this year, while sovereign issuance has sky-rocketed. The decline, said market participants, is testament to the resilience of the corporate sector, though a revival in issuance is expected in 2021.