Gabon expects $750 million from new Eurobond
JOHANNESBURG Dec 5 (Reuters) - Gabon expects to raise around $750 million through a 10-year Eurobond, according to the initial results of the combined bond buyback and new issue, which were released on Thursday.
The central African nation has offered to buy back up to $140 million of an outstanding 2017 Eurobond and to exchange the old bonds for the new issue. So far, bondholders have delivered $611 million for the new 2024 issue, the results show.
A roadshow for the deal ended in the United States on Wednesday. It is likely to price later on Thursday.
Gabon, rated BB- by Fitch and Standard and Poor's, will use the proceeds of the new bond to fund transport and power infrastructure projects, according to a preliminary prospectus.
The country sold a debut $1 billion Eurobond in 2007. The 10-year, 8.2 percent bond, which was nearly 2 1/2 times oversubscribed, was issued to buy back old Paris Club debt.
Gabon set guidance for the new offering indicating a yield of around 6.5 percent, plus or minus 12.5 basis points, IFR, a Thomson Reuters news and analysis service, said on Wednesday. That is greater than the 3.5 percent yield at which the 2017 bond is trading, which is likely to be attractive to holders of that bond.
But new investors may demand a higher yield on the new issue, market participants said. The pricing on the 2017 bond reflects its ownership structure - it is held by a limited number of large investors and doesn't trade much.
"Where it will come out at will depend on whether the existing bondholders continue dominating," said one investor. "It has a small, highly concentrated ownership ... If it's more diverse, if there are more smaller guys participating, I think it will come out wider."
Analysts say Gabon's solid fundamentals should underpin demand.
"Gabon's 2014 growth is likely to remain around the 6.5 percent average of the past three years, supported by high oil prices and public investment," said JP Morgan sub-Saharan Africa strategist Giulia Pellegrini.
But the country's fiscal situation has been deteriorating. Its budget deficit is expected to widen from 1.7 percent of GDP in 2012 - the first gap in over a decade - to 5 percent in 2015. Official economic data can also be spotty, said Standard Bank's Samir Gadio, echoing credit-rating agencies and the IMF.
"While statistical reporting and transparency tend to be problematic in Africa, the virtual absence of official figures in Gabon undermines the country's Eurobond valuations in our mind," Gadio wrote in a research note.
Gabon will use funds from an escrow account held at the World Bank to pay for the buyback.
Citigroup, Deutsche Bank and Standard Chartered are the dealer managers.
- Malaysia air probe finds scant evidence of attack: sources |
- Malaysia probes passenger backgrounds for clues on missing flight |
- Confrontation in Ukraine as diplomacy stalls |
- N.Korea using sophisticated means to avoid U.N. sanctions - U.N. report
- Freescale loss in Malaysia tragedy leads to travel policy questions