Ethiopia Plans Debut Dollar-Bond Joining Ghana, Kenya

Ethiopia plans to sell its first
dollar bond as Africa’s fastest-growing economy exploits record
demand for the continent’s debt.

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. The proceeds of the sale will be used to fund
electricity, railway and sugar-industry projects, Finance
Minister Sufian Ahmed said Oct. 8.

The Horn of Africa nation is joining issuers, including
Ghana, Kenya, Senegal and Ivory Coast, who sold what Standard
Bank Group Ltd. says is a record $15 billion of Eurobonds this
year. Government and corporate issuers are seeking to benefit
from investor appetite for higher returns before the Federal
Reserve raises interest rates as soon as next year.

“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.”

African government and corporate Eurobonds sales this year
beat 2013’s record $14 billion, Standard Bank said on Nov. 13.
Sovereigns accounted for about 71 percent of issuance, according
to the Johannesburg-based lender.

African Returns

The yield on Kenyan dollar bonds due June 2024 was at 5.91
percent today, down from 6.88 percent when it was sold in June.
Zambian dollar bonds returned almost 17 percent this year, while
Ghanaian debt earned 9.5 percent, according to the Bloomberg USD
Emerging Market Sovereign Bond Index. (BEMS)
Ivory Coast returned 1.3
percent as neighboring countries battled an outbreak of Ebola,
while Gabon earned about 11 percent.

Emerging-market assets have benefited from record-low
interest rates in developed nations that pushed investors to
seek out higher returns elsewhere. The end of quantitative
easing by the Fed and the prospect of its first interest-rate
increase since 2006 is drawing some of that money back to the

Almost 30 years after pictures of Ethiopian children with
distended stomachs were used to raise money by Bob Geldof and
Live Aid, the country is growing faster than any other African
economy, at an average of 10.9 percent over the past decade,
International Monetary Fund data shows.

Credit Rating

Ethiopia was assigned its first credit ratings in May.
Moody’s Investors Service rates it a non-investment grade B1
with a stable outlook, while Standard Poor’s gave the East
African country a B rating. The country is Africa’s biggest
coffee producer and the continent’s second-most populous nation
after Nigeria.

Ethiopia’s planned issue could be assisted by technical
factors, such as scarcity, as the Eurobond will be the only
tradable asset for international investors wanting access to the
African nation, Standard Chartered’s 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.

Ethiopia 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. It may 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, the finance
minister said last month.

(An earlier version of this story was corrected to show
that record Eurobond sales of $14 billion were in 2013.)

To contact the reporter on this story:
Lyubov Pronina in London at

To contact the editors responsible for this story:
Daliah Merzaban at
Matthew Brown, Stephen Kirkland

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