At the IMF World Bank meetings in Lima, Peru, on Thursday Angola's finance minister Armando Manuel said that his country's Eurobond ambition remains firmly on the cards, despite delays that have put the issue on hold since 2013.
We have adopted a strategy in terms of resource mobilization that taps a diverse range of sources, and a Eurobond is one of these resources
Armando Manuel, Angola
“We have adopted a strategy in terms of resource mobilization that taps a diverse range of sources, and a Eurobond is one of these resources,” said Manuel. “One of the reasons we decided to consider a Eurobond is to benchmark the country.”
A Eurobond has been put on hold as economic and financial pressures mount for the oil exporter. This year, only Côte d’Ivoire and Zambia have issued Eurobonds, while yields on African Eurobonds have widened across the board because of an expected rise in US bond yields and the drop in commodity prices.
Angola is Africa’s second-largest oil producer after Nigeria; oil accounts for 97% of exports, 45% of GDP and 66% of government revenue. With subdued global prices, Angola was forced to cut its budget by 25% to $52 billion in February; in September, the kwanza was devalued for a second time this year, by 3.3%. The currency was first devalued by 5.8% in June.
Angola has been impacted by the slowdown in China, which accounts for around 45% of Angola’s total oil exports.
Given this, Manuel insisted that the Eurobond issue would not go above $1.5 billion. Reports in February suggested the sovereign could issue up to $3 billion, depending on market conditions and investor appetite for Angolan debt. The finance ministry is still in the process of considering which banks to mandate.
While the Eurobond is being planned, Angola has taken the decision to issue locally to raise $2 billion in foreign currency.
“The $2 billion local issuance was issued last week,” said Manuel. "We currently have a number of subscriptions and we hope to have it fully subscribed in the coming days."
According to Manuel, the local issue has not affected the country's desire to look abroad. “We are still considering mobilizing external finance. We also know the earlier we go the better it is, given the expectation the Fed’s move to increase interest rates. We will definitely still go [to external markets] it’s just a question about the planning.
“We have in the [debt-management] portfolio a measure to exploit opportunities in the domestic market, and since we have considerable deposits in the domestic market we decided to issue.”
On September 25, Fitch cut Angola’s credit rating from BB- to B+ with a stable outlook citing the country’s over reliance on oil revenues and the recent global drop in prices as a vulnerability. Standard & Poor's credit rating for Angola stands at B+, while Moody's rating for Angola sovereign debt is Ba2. Both have negative outlooks.
“[Downgrades are] happening across the board with China’s slowing growth,” said Manuel. "Fitch has still kept its rating at stable, and the economic environment is still stable and we have sufficient buffers in place."
As reported by Euromoney in February, Goldman Sachs, BNP Paribas and the Industrial and Commercial Bank of China were authorized by president José Eduardo dos Santos to lead Angola's debut Eurobond. Reports then suggested that the sovereign would look to issue around $1.5 billion. But the issue of a presidential decree does not mean that financing will necessarily be completed this year.