Economy

Barclays and Deutsche Bank to Handle Zambia’s $500m Eurobond

On Thursday, Reuters reported that Zambia has selected Barclays and Deutsche Bank as book runners for a debut $500 million Eurobond, according to government sources.

The long-awaited issue is expected to be the first debut by a sub-Saharan sovereign this year and should attract decent investor interest given the southern African nation’s rapid economic growth and political stability.

The IMF projects growth of 7.7 percent this year, driven by rising copper and agricultural production and increased government spending. It forecast inflation to end the year at 6 percent, down from 7.2 percent at the end of 2011.

“We haven’t had a new African sovereign Eurobond this year,” said Tutu Agyare, founder and managing partner of Africa-focused hedge fund Nubuke Investments. “We would definitely be looking to participate.”

Zambia has been mulling a Eurobond for many years but the 2008 global financial crisis and a change in government last year delayed those plans.

Zambia is rated B+ by Fitch and Standard & Poor’s but both agencies have highlighted concerns about the direction of economic policy under long-term opposition leader Michael Sata, who came to power in September.

Analysts said the bond would probably be priced somewhere near Ghana’s $750 million, 10-year, 2007 issue, which is currently yielding 5.95 percent, although Zambia’s proximity to Namibia and South Africa might seem them used as a yardstick.

Barclays and Deutsche Bank were chosen from a short-list of 11 banks asked for proposals last month. U.S. law firm White & Case will act as legal adviser, the source, who asked not to be named, told Reuters.

A formal announcement is expected later this week.

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