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| Republic of Rwanda’s $400 million Eurobond | |
| Lead managers | BNP Paribas, Citi |
| return to the Deals of the Year 2013 index | |
In 2010, with questions surrounding how Rwanda could fund costly, large-scale projects including a convention centre and national carrier RwandAir, policymakers were forced to look for innovative ways to raise cash.
As members of the ministry of finance sought advice from international commercial banks, BNP Paribas came up with a surprising suggestion: to issue a Eurobond.
“We had seen growth in demand for prime African sovereigns in the two years preceding the issue,” says Nick Darrant, head of Ceemea syndicate at BNP Paribas based in London, who worked on the deal. “So we went to the government there and suggested this could be a real possibility. This would be a great chance to educate international investors on Rwanda’s success story.” Interest in a possible Eurobond issue slowly eased its way into popular debate at the ministry.
“The pressure was mounting and we needed to get the funding from somewhere. The minister of finance at the time, John Rwangombwa, told us to go out and find out what a Eurobond would entail,” says Kampeta Sayinzoga, permanent secretary at Rwanda’s ministry of finance.
“We all thought it was a bit of a crazy idea – a bit too far out of reach. But then we started getting advice from friends of Rwanda, companies that were used to going to the debt market. We came to realize that the requirements were actually not all that difficult to meet.”
On April 25 2013, Rwanda’s inaugural 10-year Eurobond went to market with a coupon of 6.625% and an order book of $3.5 billion. The yield was tighter than expected and eight-and-a-half times oversubscribed. BNP Paribas and Citi were the lead managers.
At less than $500 million, the Eurobond wasn’t eligible for inclusion in JPMorgan’s emerging market bond indices – that would have triggered additional demand from index trackers and encouraged secondary-market liquidity.
But $400 million was earmarked for specific projects – the government didn’t need any more. “Despite the fact that the bond wasn’t included on the index, demand exceeded our expectations,” says Darrant. “Investors were buying the bond for one reason alone – they believed in the Rwanda story.”
The timing couldn’t have been better. African credit markets experienced a rally in the first quarter of 2013 that had not been seen before. The issue narrowly missed the subsequent fallout of Ben Bernanke’s announcement in May that the Federal Reserve would begin tapering, which led to other African issuers, including Nigeria and Ghana, paying a premium for their debt. International aid to Rwanda resumed after reports that the government had supported the M23 militia in the Democratic Republic of Congo were rejected.
“Doubts had been dealt with and donor flows had resumed and we went on the roadshow with a complete, positive story to tell,” says Rajiv Shah, head of DCM Africa at BNP Paribas.
Roadshows took place in London, Munich, Hong Kong, Singapore, Boston and California. “We saw a full range of reactions from investors,” says Shah. “Some of them were only familiar with events of two decades ago, eager to find out a bit more about the country. Others came up to us to let us know that they had been waiting for something like this to happen – these were the ones already following Rwanda’s commendable growth.”
The genocide of 1994 devastated Rwanda’s society and economy, but the country has recovered well. While it is comparatively easy to grow from nothing, Rwanda’s forward-looking government has put the country on the right track.
Between 2001 and 2012, real annual GDP growth averaged 8.1%. Between 2006 and 2011, poverty in Rwanda dropped by 11.8%. And although Rwanda doesn’t boast the natural resources of some of its peers, which have relied heavily on the commodities stories that have driven African growth for some time, the country has been able to carve out a niche for itself in the IT and services sector.
“Rwanda has been built on internally generated growth,” says Shah. “Visible growth above ground – not below.”
