Ethiopia Starts Marketing Debut Eurobond for Projects

by Zelalem

Ethiopia raised $1 billion in a debut
international bond issue today, taking advantage of record
demand for high-yielding African debt to fund electricity,
railway and sugar-industry projects.

The 10-year bonds priced to yield 6.625 percent, at the
lower end of the 6.625 to 6.75 percent price guidance, according
to a person familiar with the matter, who isn’t authorized to
speak publicly and asked not to be identified. Kenya’s $2
billion of bonds due June 2024 yielded 5.89 percent at 5:21 p.m.
in London.

Africa’s fastest-growing economy and biggest coffee
producer 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
as soon as next year.

Ethiopia’s bond yield is “decent value for the deal given
the limited knowledge and different nature of the Ethiopian
economy and the challenges it faces compared to peers in the
region,” Kevin Daly, a senior portfolio manager at Aberdeen
Asset Management Plc, said by e-mail.

The country made a strong case for infrastructure
development and financing needs at investor meetings, “which
suggests they will be looking to come back to the market in near
term,” Daly said.

Ethiopia will probably need to invest about $50 billion
over the next five years, of which $10 billion to $15 billion
may come from foreign investors, Finance Minister Sufian Ahmed
said on Oct. 7. Most of the capital raised will be used to
develop sugarcane plantations, a 6,000-megawatt hydropower dam
on a tributary of the Nile River and the country’s railway
network, he said.

“It is certainly a good time for them, market wise,”
David Cowan, an Africa economist at Citigroup Inc., said at a
conference in London. “Ethiopia is still one of the most closed
economies, although it has a very strong developmental vision.
They have to think about how they use that money to drive that

Band Aid

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

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.

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 and Fitch Ratings
awarded the East African country B, one grade lower.

Moody’s said the nation’s economic prospects, while
favorable in the long term, were constrained by political risks
and dependence on volatile agricultural commodities. Deutsche
Bank AG and JPMorgan Chase Co. managed Ethiopia’s sale.

To contact the reporters on this story:
Robert Brand in Cape Town at;
Paul Wallace in London at;
Lyubov Pronina in London at

To contact the editors responsible for this story:
Vernon Wessels at
Zahra Hankir

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