Republic of Angola Enters Eurobond Markets with 10-year benchmark bond of US$1.5 billion

Luanda, Angola, Capital Markets in Africa — Republic of Angola launched its first 10-year benchmark Eurobond on Thursday with the aim of raising US$1.5 billion for long-term economic development and to benchmark the country, according to the Angolan Finance Ministry.

The Finance Ministry stated also that a sovereign issuance could enhance Angola’s transparency in the management of its public accounts and better manage the state’s financing costs.

The statement further emphasized that the sovereign debt was issued on the London Stock Exchange in order to be less dependent on traditional sources of credit such as bilateral and commercial funds.

The African sovereign has hired Deutsche Bank, Goldman Sachs and ICBC International to arrange the meetings to  begin  in Europe and the United States from October 26 ahead of a potential debut Eurobond.

In August 2012, Angola issued a five-year participating  bond, similar to Eurobond of US$1 billion at an annual coupon rate of 7.00 percent.  The yields on the Angola 2019 note was 7.91 percent as at October 23, 2015. Given current market outlook, investors will be demanding premium between  8.70 percent to 11.25 percent in coupon rate.

Angola is Africa’s second-largest oil producer after Nigeria; oil accounts for 97% of exports, 45% of GDP and 66% of government revenue. With subdued global prices, Angola was forced to cut its budget by 25% to $52 billion in February; in September, the Kwanza was devalued for a second time this year, by 3.3%. The currency was first devalued by 5.8% in June.

Fitch cut Angola’s credit rating from BB- to B+ with a stable outlook citing the country’s over-reliance on oil revenues and the recent global drop in prices as a vulnerability. Standard & Poor’s credit rating for Angola stands at B+ while Moody’s rating for Angola sovereign debt is Ba2. Both have negative outlooks.

The 10-year benchmark Eurobond has been put on hold since 2013 as a result of economic and financial pressures mount for the oil exporter. In 2015, Gabon, Côte d’Ivoire, Zambia, and Ghana  have issued Eurobonds. Most of the yields on African Eurobonds have widened across the board because of an expected rise in US bond yields and the drop in commodity prices (see African Sovereign Eurobond September 2015 Review for detail).