Reuters reports that Zambia has selected Barclays and Deutsche Bank as book runners for a debut $500 million Eurobond, a government source said on Thursday.
The long-awaited issue is expected to be the first debut by a sub-Saharan sovereign this year and should attract decent investor interest given the southern African nation’s rapid economic growth and political stability.
The IMF projects growth of 7.7 percent this year, driven by rising copper and agricultural production and increased government spending. It forecast inflation to end the year at 6 percent, down from 7.2 percent at the end of 2011.
“We haven’t had a new African sovereign Eurobond this year,” said Tutu Agyare, founder and managing partner of Africa-focused hedge fund Nubuke Investments. “We would definitely be looking to participate.”
Zambia has been mulling a Eurobond for many years but the 2008 global financial crisis and a change in government last year delayed those plans.
Zambia is rated B+ by Fitch and Standard & Poor’s but both agencies have highlighted concerns about the direction of economic policy under long-term opposition leader Michael Sata, who came to power in September.
Analysts said the bond would probably be priced somewhere near Ghana’s $750 million, 10-year, 2007 issue, which is currently yielding 5.95 percent, although Zambia’s proximity to Namibia and South Africa might seem them used as a yardstick.
Namibia’s debut $500 million Eurobond, issued in October, is now priced at 5.18 percent.
Barclays and Deutsche Bank were chosen from a short-list of 11 banks asked for proposals last month. U.S. law firm White & Case will act as legal adviser, the source, who asked not to be named, told Reuters.
A formal announcement is expected later on Thursday.
Jan Dehn, portfolio manager at Ashmore Investment Management, an emerging markets specialist, said Zambia should not try to issue in the current environment given the uncertainty over Greece’s future in the euro zone.
“For new issuers to come to market there has to be a degree of relaxation,” he said. “People have to feel quite bullish and be willing to take exposure to brand new countries. At the moment the risk aversion looks pretty elevated in Europe.”
Rapid GDP growth on the resource-rich continent and improving macroeconomic fundamentals have allowed more and more sub-Saharan African governments to tap international markets.
South Africa, Ghana, Gabon, Senegal, Ivory Coast, Congo Republic, Nigeria and Namibia all have foreign currency bonds
[Reuters]
Why am I not surprised. In the eighties before our eyes were opened by God ( love my Christian nation ) this would have been great news. Now take it with a bucket of salt. Why not deal in China bonds. Or israeli Agricultural notes( their agriculture is awesome in Solomons’ home).
What are these Eurobond webantu? Economists please explain clearly using a labeled diagram and simple English! Ema stocks iya ku Europe mwa?
Eurobonds are loans issued in different currencies for which the borrower pays interest for a period of 10, 20, 30 years. In this case the Zambian government borrows money in the European money market and issues an IOU (I Owe You) to the lenders. The lenders can buy and sell the IOU on the money market.
Every time I hear IMF in a paragraph I cringe.
” Africa-focused hedge fund Nubuke Investments ” enough said.
“Jan Dehn, portfolio manager at Ashmore Investment Management, an emerging markets specialist, said Zambia should not try to issue in the current environment given the uncertainty over Greece’s future in the euro zone.” I am listening.
@2 Ata. A bond in simple terms is a loan. It is pure kaloba. There are some individuals and institutions who are sitting on piles of cash. So what they do is to lend it to governments at an agreed interest rate for a specified period.
What is this? im lost. my grade 12 qualifications arent helping me much here. Leteni utu ma politics
What is Zambia planning to spend this 500m euros on?
@ #8 Ice_Road_Trucker – the govt needs money to cover travel expenses and change will be used to buy VX and hammers.
Wait
 you will hear more statemnts from Ukwa kabili shaingilah.
Nikapito yakutuntila imbushi ukutwala ku mido isiti .
Its a Loan, mwebantu long term loan in lay mans english, now with the greece crisis we need to be careful as the entire euro zone may crash into a crisis if Greece does not pull out of the euro zone and that may make our bond less attractive hence require high returns making it expensive… if the RSA and NAMIBIA bonds are almost to maturity we may be alone from sub-sahara when the Euro zone crashes, projected to be towards the end of 2014 as stated by experts….. Investment Analyst, liato1
Oh no, nkongele without proper use for the money. This should not be on!Â
….seen the vultures surrounding the deal? Lawyers from across the Atlantic and others from no one knows, and it’s us paying all of them.
We should have headed to China like everyone else.
We’ll see if PF will perform on the EU Bond…
Am not comfortable at all with this bond issue kwena……I just hope it works out as viewed by our economic advisers lest we grapple in poverty.God help zambia my beloved country,let no one dupe us
Iyo mulesekesha guys. Zoona the government should tell us what it will invest the money on. Is it roads, building new districts. Buying cars, allowances, opening factories in Mpulungu or what?