Tunisia
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Egypt and Tunisia are in a stickier state than Kenya but investors expect them to survive near-term
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Sovereigns have managed to source other financing while bond markets have closed to them
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Without an IMF deal Tunisia will struggle to get any more funding from bilateral partners
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Meanwhile, Egypt is nearing its own IMF deal but should not need to restructure its debts
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The north African country thought to have no access to international debt capital markets
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Days after the Tunisian President Kais Saied shocked the world by freezing parliament and boosting his executive power, sources say that investors have little to be concerned about as conversations with the IMF continue to progress. The political saga, which some are calling ‘much-needed’, will not impact Tunisia’s ability to service its debt.
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A decade after the Arab Spring erupted in Tunisia, the country has found itself once again in the throes of a political crisis, sending shockwaves through investors. The president’s abrupt seizing of executive power — which some have labelled a coup — poses yet another challenge for the country, though some said there may be buying opportunities on the horizon.
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As its debt-to-GDP ratio inflates and its public finances come under pressure, some have wondered if Tunisia will succumb to a debt restructuring process. But the governor of the Central Bank of Tunisia, Marouane El Abassi, told GlobalCapital that the country is intent on securing new IMF funding as a prerequisite to entering capital markets.
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Tunisia, one of the latest emerging market countries to fall into the grips of crisis, is facing myriad problems following its prime minister’s shock resignation this week. Though the government has approached sovereign creditors for debt relief, some say it may have more trouble obtaining payment holidays on its existing bonds, as the private sector debt relief debate for emerging markets brews.
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The Republic of Tunisia printed a tight €700m 6.375% 2026 bond on Wednesday from a book of nearly €2bn. A syndicate manager away from the deal said it was a good demonstration of the enthusiasm for emerging market credit.
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The initial guidance for the Reg S/144A deal was put out at 6.875% area on Wednesday morning in London.
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The Republic of Tunisia does not finish its roadshow until Tuesday 9 July, but after a 100bp rally in its euro 2024s since the start of June and strong roadshow meetings so far, a seven year — the longer end of the planned tenor for the benchmark bond — looks to be on the cards.
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The Republic of Tunisia does not finish its roadshow until Tuesday, but after a 100bp rally in its euro 2024s since the start of June and strong attendance at the roadshow meetings so far, a seven year — the longer end of the planned tenor for the benchmark bond — looks to be on the cards.
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Tunisia raised €500m of five year paper on Wednesday with a 144A/Reg S benchmark.
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The Central Bank of Tunisia, on behalf of the sovereign, hit the market on Wednesday morning to print a five year euro benchmark.
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The Republic of Tunisia hit screens on Thursday, announcing a roadshow to promote a euro benchmark — the nation’s first since February 2017.
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Tunisia’s first Eurobond since 2005 demonstrated a firm show of support for a borrower which acknowledges it still has many issues to address – social, political and economic. But despite the deal’s success, Finance Minister Lamia Zribi said that Tunisia is keen to issue aid-backed bonds in future, in order to keep costs down.
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Fitch’s downgrade of Tunisia’s credit rating was based on out-of-date information and negatively impacted the sovereign’s recent Eurobond trade, Lamia Zribi, Tunisia’s finance minister told GlobalCapital.
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Even heavy indications from US Federal Reserve chair Janet Yellen the central bank will raise interest rates at its next meeting were not enough to derail the strong primary market in emerging market bonds.
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Tunisia returned to euros for the first time since 2005 on Friday but the €800m deal was by no means a blow out and the leads were unable to move pricing as the borrower made a play for new investors.
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Tunisia has set the yield on its seven year euro bond issue on Friday morning at 5.75%, unchanged from initial price thoughts.
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Tunisia has opted for a two day execution strategy and is collecting indications of interest for its first euro-denominated trade since 2005, with an aim of printing the deal on Friday.