|
|
| Republic of Namibia debut Eurobond | |
| Size | $500 million |
| Date | October 27 2011 |
| Lead managers | Barclays Capital, Absa Capital and Standard Bank |
| Coupon | 5.5% |
| Tenor | 10 years |
| return to the Middle East & Africa Deals of the Year index | |
Meanwhile, in Africa, the main story was not just about new funding sources, but also the arrival of new issuers, as investors turned optimistic about the continent’s success. First-time benchmark-sized Eurobonds by African sovereigns became a stamp of approval for these countries’ economic prospects, and will encourage further capital flows.
In January 2011, Nigeria was the first African sovereign to issue a benchmark debut issue with a 10-year $500 million deal. Senegal followed in May with a $500 million 10-year deal.
However, the debut sovereign Eurobond from the Republic of Namibia on October 27 perhaps best encapsulates the trend of sovereigns that were previously unknown to international markets now being able to grab investors’ attention.
Raising $500 million for the issuer and with maturity in 2021, Namibia’s 144A/Reg S deal built an order book of $2.75 billion. After roadshows in nine cities in the US and Europe, it was priced to yield 5.75% with a coupon of 5.5%, and traded up in the secondary market.
“One of the keys to the bond’s success was having the flexibility to price the deal quickly during the global market rally after the EU leaders’ summit on October 26,” says Florian von Hartig, Standard Bank’s global head of debt capital markets.
 |
|
Peter Baillargeon, Standard Bank |
Namibia has a population of just 2 million in a country bigger than Turkey. It is also looked at as a potential oil exporter. One of the handful of energy firms exploring the country has estimated potential oil reserves in Namibia of around 10 billion barrels – roughly equivalent to the deposits of Mexico or Angola. “Even if they were previously active in the African bond market, most investors in the bond would have had no reason in the past to consider Namibia,” says Peter Baillargeon, director of debt capital markets at Standard Bank, joint bookrunner alongside Barclays Capital. “The fact this issue succeeded at a time of such extraordinary market volatility shows the serious attention Africa is getting among global investors.”
Projections on oil revenues have not yet been included in the Namibian state’s budgeting. The extent of reserves is still unproven and production is not yet under way. As a result, Namibia could not rely on future oil exports as a selling point during the roadshow. It was hard work as well to convince investors of the political stability of a country that gained independence from South Africa only in 1990.
Like South Africa, Namibia suffers from extremely high unemployment. Some investors drew a comparison to North African countries with high unemployment now experiencing civil unrest. The counter-arguments were Namibia’s low debt-to-GDP, about 17%, and high growth rates, around 6% over the past two years.
The issuer argued that the bond would be used to finance infrastructure and development projects to address unemployment. “As an upper-middle-income country, Namibia is less able to access the concessional loan funding available to many other African countries,” says Michael Mukete, assistant central bank governor.
