| JOHANNESBURG, April 26
JOHANNESBURG, April 26 Rwanda's debut $400
million Eurobond was trading at par on Friday, a day after a
heavily oversubscribed sale, a sign that the deal was "priced to
perfection," according to the lead managers.
The 10-year bond was sold at a yield of 6.875 percent and
sold off marginally early on Friday before going back to par
later in the day.
"The bonds went free to trade on Thursday afternoon and
we've seen two way flow since then with the bonds closing the
week at the reoffer price of 98.213," said Nick Darrant, head of
CEEMEA syndicate at BNP Paribas, which led the deal with
Citigroup. "The deal was priced to perfection."
The order book for the bond, which carries a coupon of 6.625
percent, was $3.5 billion, more than 8.5 times the issue size,
underscoring the huge investor appetite for high-yielding
African sovereign debt and reflecting high global liquidity.
At less than $500 million, Rwanda's bond was ineligible for
JP Morgan's emerging market bond indices that would have
automatically triggered demand from index trackers and ensured
increased secondary market liquidity.
Rwanda ended up paying a premium to other sub-Saharan
African Eurobonds, such as Zambia, whose 2022 bond
is currently yielding 5.6 percent, and Senegal,
whose 2021 bond is trading at 5.5 percent.
However, officials were not tempted to increase the size
because they wanted to demonstrate prudent debt management and
did not have projects to the stage where they could deploy an
extra $100 million, said Peter Sullivan, head of Citi's Africa
public sector group.
"They realized that they may give away something on the
coupon but they were more concerned about absorbing the right
amount and taking on a prudent level of debt," he said.
Rwanda plans to use half the proceeds from the issue to
repay outstanding loans on the Kigali Convention Centre and on a
development plan for the national airline, RwandAir.
The remaining funds will be used to pay for the completion
of the convention centre and to finance a hydro power project.
Adding to Rwanda's appeal to investors are strong economic
growth, low debt and recent political stability. President Paul
Kagame has won praise for leading Rwanda's recovery after the
1994 genocide and implementing reforms to improve its business
climate, but critics say he has an autocratic style.
Economic growth averaged 8.2 percent from 2006 to 2012 and
the International Monetary fund projects growth of 7.6 percent
Rwanda offers diversification from other sub-Saharan African
sovereigns that have issued Eurobonds, such as oil producers
Nigeria and Gabon, said Mark Bohlund, senior economist,
sub-Saharan Africa, at IHS Global Insight.
"If you want to have exposure to sub-Saharan Africa but
you're worried about a drop in commodity prices and you want to
rebalance your portfolio Rwanda is a good investment," he said.
Fitch assigned the bond a B rating, in line with the country
(Reporting by Tosin Sulaiman; editing by Ron Askew)