Tuesday, November 25, 2014

Ethiopia Plans Debut Dollar-Bond Joining Ghana, Kenya

Ethiopia, Africa’s fastest-growing economy, plans to sell its first foreign-currency bond to fund electricity, railway and sugar-industry projects.
Ethiopia picked Deutsche Bank AG and JPMorgan Chase & Co. for fixed-income investor meetings in Europe and the U.S. beginning tomorrow, according to a person familiar with the matter, who asked not to be identified as the information is private.
African issuers, including Ghana, Kenya, South Africa, Senegal and Ivory Coast, have issued international bonds this year as they seek to benefit from investor-appetite for higher returns before the Federal Reserve raises interest rates as soon as next year. The yield on Kenyan dollar bonds due June 2024 were at 5.91 percent today, down from 6.88 percent when it was sold in June.

“There is an incentive to issue before U.S. rates start to gradually edge up from next year,” Samir Gadio, head of African strategy at Standard Chartered Plc in London, said today by e-mail. “The market seems to expect that Ethiopia will price among the highest yielding African sovereigns.”
The issue could be assisted by technical factors, such as scarcity, as the Eurobond will be the only tradeable asset for international investors wanting access to the African nation, Gadio said.
State Minister of Finance Abraham Tekeste and Haji Ibsa, a spokesman for the Finance Ministry, didn’t answer their mobile phones when Bloomberg called each of them seeking comment today.

Infrastructure Investment

Ethiopia will probably need to invest about $50 billion in infrastructure over the next five years, of which $10 billion to $15 billion may come from foreign investors, Finance Minister Sufian Ahmed said Oct. 8.
Kenya said today it plans to sell more of its 2019 and 2024 Eurobonds to invest in projects from roads to water.
Ethiopa grew quicker than any other African economy at an average of 10.9 percent over the past decade, boosted by spending on infrastructure, International Monetary Fund data shows. The Horn of Africa country is building the continent’s biggest hydropower plant on the Blue Nile River, known as the Grand Ethiopian Renaissance Dam, that will probably increase electricity supply five-fold by 2020.