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Ethiopia’s $1bn eurobond oversubscribed on debut

By Tinishu Solomon
Posted on Monday, 8 December 2014 10:31

The East African country debuted with a 10-year- $1 billion Eurobond at a coupon rate of 6.625 percent.

According to the Finance and Economic Development ministry, the success of the bond “affirms widespread positive receptivity to Ethiopia’s track record of significant economic growth, prudent fiscal management and targeted reform agenda”.

Investors remained engaged throughout the process

“The transaction successfully crystallised the positive momentum generated from Ethiopia’s international roadshow, during which over 80 institutional investors were visited in the United States and Europe,” the ministry added in a statement.

Ethiopia attracted high quality investor interest despite a challenging environment in the market.

“Investors remained engaged throughout the process and reflected sizeable appetite to participate in the deal,” the Finance ministry said.

Initial price projections for the bond were put at a yield level of around 6.750. The government eventually settled for 6.625 percent for the $1 billion bond.

Ethiopia focused on a 10-year maturity rate to create a strong benchmark, which matched its preference for duration given its infrastructure-driven use of proceeds.

The transaction was distributed primarily to United State investors who accounted for 50 percent of the subscribers, followed by those in the United King (35 percent), Europe (14 percent) and others (1percent).

Fund managers dominated allocations (receiving 96 percent), underscoring the high calibre of demand.

A company from France acted as a financial advisor to the Finance and Economic Development ministry.

Deutsche Bank and J.P. Morgan acted as joint lead managers for the transaction.

Ethiopia has said the funds would be used to finance new infrastructure for the Horn of Africa nation, which battled against famine three decades ago and now boasts some of the fastest economic growth rates in Africa.

Ethiopia’s success follows that of Kenya whose $2 billion Eurobond in June was heavily oversubscribed.

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