Cote d’Ivoire joins bond market rush

Cote d’Ivoire is set to become the latest sub-Saharan African state to issue a sovereign bond – and perhaps the most daring in what has already been a landmark year.

“The financing deal will be completed by 2014,” the Ivorian Prime Minister Daniel Kablan Duncan told Emerging Markets. Cote d’Ivoire has been under an IMF programme which runs until the end of next year and which is subject to conditionality to contract new loans. “Access to the eurobond market is complicated,” he said.

Cote d’Ivoire has begun consulting banks to raise the equivalent of between $500 million and $1 billion in the local CFA franc currency, which is pegged to the euro. “We want to finance productive investments,” he said.

It is part of a wider $22 billion funding programme to finance investment up to 2015; $9 billion will come from public loans and $13 billion from private sector loans.

Over the last 18 months Nigeria, Zambia, Ghana, Tanzania and Rwanda have joined North African states Egypt, Tunisia and Morocco in launching sovereign bonds, mostly with considerable success as investors have sought yield.

Several of those deals have been considered landmarks, none more so than the Republic of Rwanda, which made its debut in April with a $400 million 10-year bond and attracted a $3.5 billion order book – more than half the country’s entire GDP – despite being rated just B by Standard & Poor’s and Fitch.

Ivory Coast would perhaps be more remarkable, since it is only two and a half years since the country restructured $2.3 billion of eurobonds in February 2011. It did so amid civil war following the November 2010 elections, in which former president Laurent Gbagbo refused to give up power to opposition leader Alassane Ouattara, leading to fighting and the death of at least 3,000 people.

Kablan Duncan denied the previous restructuring would be an obstacle to the launch of a new bond in CFA. “We have been talking to the [International Monetary] Fund about this,” he told Emerging Markets.  “I can tell you that we are able to do it,” he added, without elaborating.  “If it’s in CFA, it will be possible, because there is no exchange rate risk.”

Kablan Duncan said Cote d’Ivoire was under an IMF programme until the end of next year, and that is subject to conditionality to contract new loans. “Access to the eurobond market is complicated,” he said. One challenge the country may face is that market sentiment has changed dramatically since the Rwanda deal. Rwanda paid a yield of just 6.875% in April at a time when Greek debt was trading at 11%.

When Nigeria, higher rated and with a much greater international standing than Rwanda, came to the markets in July, the tide had turned following Federal Reserve Governor Ben Bernanke’s comments on tapering.

Nigeria paid almost the same yield for its 10-year paper as Rwanda did. Ghana is a closer comparison to Rwanda, having the same rating; its deal in July paid 8% for 10-year funds, despite Ghana being a repeat borrower and Rwanda a debut.