LONDON (Reuters) - Namibia’s debut $500 million, 10-year Eurobond rose on its first day of trading on Friday as appetite surged for frontier market debt on hopes that euro zone leaders are finally addressing their region’s sovereign debt crisis.
The mining-dependent southwest African nation held a series of investor roadshows a month ago to promote the issue, but the central bank had said on Wednesday it would not proceed with the sale due to the global market turmoil.
Thomson Reuters’ IFR service said the government had suddenly changed its mind after a summit of EU leaders agreed measures early on Thursday to help resolve the euro zone’s debt crisis. The deal sparked a worldwide rally in riskier assets.
Traders said the bond, which carries a 5.5 percent coupon and was priced to yield 5.75 percent, had firmed in early London trading on Friday, its price pushing up from 98.119 to as high as 101.
Namibia’s cost of borrowing compared favourably with that of some European sovereigns. Italy, the euro zone’s third-largest economy, sold a 10-year BTP at auction on Friday at a euro-era high yield in excess of 6 percent.
The favourable reception from European and U.S. investors sends a clear signal to the likes of Kenya, Zambia and Tanzania, who have all floated Eurobond plans, that the international debt markets are not closed to frontier issuers.
“For other African countries there may not be such a rush to the market but they can hold on to the hope that that kind of issuance is possible,” said Razia Khan, head of Africa research at Standard Chartered.
“They don’t need to put those plans on the back burner entirely.”
The Namibian bond’s yield compares favourably with other frontier Africa Eurobonds issued in recent years, most notably a $500 million 10-year issue in January from Nigeria, Africa’s biggest oil producer, which priced at 7.0 percent.
Ghana’s 2017 issue, launched in 2007, is currently trading at a yield of 6.3 percent, while Gabon’s, issued the same year, is at 5.56 percent.
Domestic 10-year Namibian debt currently yields around 9 percent, traders said, while 10-year bonds in neighbouring South Africa are yielding 7.77 percent.
Namibian deputy finance minister Calle Schlettwein told Reuters in Windhoek the government had kept the deal under wraps until it was sure it had gone through. A statement giving more details should be released on Friday, he added.
Stephen Bailey-Smith, head of Africa research at Standard Bank in London, said one surprise bidder for the bond had been another African central bank.
“A number of African central banks have been talking about diversifying their reserves and I think this is part of that process,” he said.