The Democratic Republic of Congo’s Eurobond debut is a reminder that while investors may have painful memories of investing in a particular place, things can and do change for the better. Bond buyers should not dwell for too long on the past when making investment decisions.
While DRC has never issued Eurobonds, foreign investors know it well, with its vast natural resources long drawing in overseas investment.
This has led to conflict between the government and foreign investors, a worldwide phenomenon and one not confined to DRC or Africa.
One of the biggest drags on DRC as a credit is its poor governance and weak rule of law, and criticism on that front is justified.
But the process of issuing public Eurobonds means DRC has had to explain to foreign investors, at length, how it will improve. If it wants long-term access to the Eurobond market at cheaper rates, it will need to.
EM bond investors which have been stung in the past in DRC should not judge the country’s entry to the Eurobond market on those experiences.
Just because things have gone wrong for investors in a jurisdiction it does not mean they will again, just as things can go wrong somewhere they previously have not.
Investors can have very long memories, particularly of bad experiences, but that should not cloud their judgement. Past performance is not an indicator of future performance.
And every asset has a price.
Investors’ duty is to make money for their clients. The DRC is offering chunky yields on its debut deal for a reason. But if it is a serious borrower, there will be more reasons in the future for it to pay much less for its borrowing.