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| Afren senior secured bond | |
| Size | $450 million |
| Date | January 27 2011 |
| Lead managers | BNP Paribas, Deutsche Bank and Goldman Sachs |
| Coupon | 11.5% |
| Tenor | Five years |
| return to the Middle East & Africa Deals of the Year index | |
Corporates from sub-Saharan Africa will find it easier to access the bond market now that sovereign benchmarks are in place that give an alternative to the equity markets. Indeed, this year saw perhaps the first non-South African sub-Saharan African corporate to borrow in the international capital markets.
Afren’s headquarters are in London and the exploration and production firm is a FTSE250 company, but its energy assets are all in Africa, primarily Nigeria. Nigeria is the location of the oil fields against which the bond is secured, on a first-priority basis.
With maturity in 2016, the $450 million bond built an order book of $1 billion and was priced to yield 11.75%, with a coupon of 11.5%. Dedicated emerging-market funds accounted for about 85% of the bonds, with high-yield funds taking the rest.
Afren had a junk rating at the time of the bond issue because of the political risk of owning oil assets in Nigeria and because oil exploration is always a hit-and-miss business. But early last month, the firm announced it had reached its production target – 50,000 barrels a day – and said it expected further increases in production.
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The firm was also able to assure investors of low debt and low production costs: its break-even oil price was $32 a barrel at the time of the issue, while its net debt to adjusted ebitda was 0.25 times. “Afren broke new ground in creating a benchmark for sub-Saharan and European oil exploration and production credits,” says Neil Shuttleworth, head of EEMEA debt capital markets syndicate at joint-bookrunner Deutsche Bank.
