Ethiopia Plans Debut Dollar-Bond Joining Ghana, Kenya

By Lyubov Pronina Nov 25, 2014


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

6a00d8341bf73153ef0105359fa532970c-800wiEthiopia 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 U.S.

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 dmerzaban@bloomberg.netMatthew Brown, Stephen Kirkland

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