Ethiopia selects int’l banks for its Euro Bond


Ethiopia is said to come to an agreement with three international financial institutions; the US based JP Morgan, the French BNP Paribas and the German Deutsche Bank for the sale of bonds. Sources told Capital that other financial firms like Barclays Bank (UK) and US Exim Bank are also tipped to sale the bonds issued by the government.
Sufian Ahmed, Minister of Finance and Economic Development (MoFED) recently announced that the government will issue a ten bond starting in January 2015.
In its first ever rating Ethiopia got impressive rates from Moody, Standard & Poors’ and Fitch, and the bond sales is expected to get strong demand from potential investors in Europe and America.
Before the rating, Ethiopia selected Lazard Ltd., a French investment bank and asset manager in a bid to secure its first credit rating, which would pave the way for issuing a debut Eurobond, an international bond denominated in a currency not native to the country where it is issued.
The credit rating is used by individuals and entities that purchase the bonds issued by companies and governments to determine the likelihood that the government will pay its bond obligations.
Lazard is still advising the Ethiopian government in issuing the bonds.
Zemedeneh Negatu Managing Partner – Ethiopia and Head of Transaction Advisory Services of
Ernst & Young in an emailed comment from London told Capital that the issuance of bond will, for the first time ever, let Ethiopia to access the huge global capital markets, broadening its source of financing.
“Until now, the primary sources of financing had been the FDI’s such as the World Bank and the African Development Bank and bilateral loans with foreign governments. While these sources of financing will continue, Ethiopia will now have flexibility where it sources the financing from and lessens its dependence on just the traditional sources. Of course the financing from the bond will be a great support for the significant infrastructure projects in Ethiopia which are needed to sustain the economic growth,” Zemedeneh said.
Zemedeneh further said that the Sovereign Euro Bond issuance affirms the ascendency of Ethiopia’s economy to global investors which is now the fourth largest GDP in a Sub-Saharan Africa at USD 118 billion.
“In the next few years, after this sovereign bond is issued successfully, I can see a real possibility for Ethiopian companies, both private and State owned to tap the global bond and equity markets for their financing needs,” he added.
“Overall, Euro Bond issuance by Ethiopia is timely since there is huge relatively cheap capital around the world looking for attractive investment destinations. Also, there are many global investors that have been looking to participate in Ethiopia’s growth and therefore buying the bond gives them an excellent opportunity.”
Few months ago Kenya, was rated B+ by Fitch Ratings and Standard & Poors’ and B1 by Moody, and raised two billion dollar from sale of Eurobond. Initially the country targeted to raise USD 1.5 billion but the amount went USD 2 billion due to high interest from buyers.
The Kenyan’s five-year, 500 million dollar bond yielded 5.875 percent and the 10-year 1.5 billion dollar issue yielded 6.875 percent.
The strong economies in the continent, Nigeria and South Africa are the major actors on Eurobond.
Capital tried to contact all the three banks; JP Morgan, BNP Paribas and Deutsche Bank but all of them did not respond to the emailed queries.