Ethiopia Hires Deutsche Bank and JP Morgan for a 1Billion USD, 10 Year Note, Bond Sales

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Ethiopia has been growing at a double digit rate for the past decade and that has led to ratings of B1 (Moody), B (Standard & Poor), and B (Fitch) by three financial institutions.

Ethiopia via hired banks (Deutsche Bank and JP Morgan) will start organizing a series of fixed income investor meetings across Europe and the US starting Wednesday, November 26, 2014.

The following two articles talk about Ethiopia’s effort to tap into international bond markets to reportedly raise around US$1bn through a 10-year note.

Ethiopia out with dollar bond, Kenya announces tap

The Federal Democratic Republic of Ethiopia hit screens on Tuesday with a debut dollar bond roadshow announcement minutes before Kenya announced a tap of its outstanding US$500m 5.875% 2019s and US$1.5bn 6.875% 2024s.

“It’s not ideal,” said a source. “If someone asked you whether you’d want two East African names in the market at a similar time, you’d probably say ‘no’.”

But it helps that neither economy is particularly dependent on oil prices, which have hit multi-year lows in recent weeks, the source added.

A bond banker away from either deal argued that the Kenya tap should not have a detrimental affect on Ethiopia’s deal.

“Kenya will be done and dusted long before Ethiopia comes,” added the bond official.

Deutsche Bank and JP Morgan, which is also on the Kenya tap, have been hired by Ethiopia to organise a series of fixed income investor meetings across Europe and the US starting Wednesday.

BNP Paribas was also rumoured to be on the mandate, IFR reported on October 16. The French bank declined to comment.

Ethiopia (B1/B/B) is thought to be looking to raise around US$1bn through a 10-year note, according to a source away from the trade. The deal will be 144A/Reg S.

Ivory Coast (B1/NR/B) is one close comparable, according two bond officials away from the Ethiopia deal. Ivory Coast’s US$750m 2024s were trading at a Z-spread of 341bp on Tuesday morning, according to Tradeweb.

Rwanda’s (NR/B/B) 2023s, which were trading at Z+384bp on Tuesday, and Nigeria’s (Ba3/BBB-/BBB-) 2023s, trading at Z+329bp, are also comparables, added another source.

Meanwhile, higher-rated Kenya (NR/B+/B+) will also likely be used as a comparable.

Kenya’s 2024s were trading at a Z-spread of 350bp at Tuesday open. This spiked to Z+362bp immediately after the tap announcement, while the 2019s started the day at a spread of Z+333bp before rising to Z+339bp, according to Tradeweb.

One banker away from both the Ethiopia and Kenya deals said the former could be positioned to come inside the latter, despite its lower rating. However, another banker said, if Ethiopia does price inside Kenya that would be because of technicals – with Ethiopia’s bond likely to be much smaller than Kenya’s outstanding 2024s – rather than a reflection of credit fundamentals.



Frontier Bond Sales Poised for Buoyant Year-End

Pakistan and Kenya Follow Ethiopia by Announcing Debt Sale Plans


An underpass in Ethiopia's capital Addis Ababa, in May.
Photo: An underpass in Ethiopia’s capital Addis Ababa, in May. REUTERS

Frontier market countries including Kenya, Ethiopia and Pakistan—each rated at least four notches below investment grade—all announced debt sale plans Tuesday, seeking to benefit from still relatively low interest rates and persistent investor demand for higher yielding debt. The window for issuing new debt generally closes in the middle of December for several weeks.

“If you wait until January, there’s generally a lot of issuance so if you are a smaller borrower you might be concerned that you’d get swamped out,” said Stuart Culverhouse, chief economist and head of research at Exotix, an investment banking brokerage that specializes in frontier markets.

So far this year, frontier borrowers including Kazakhstan, Ivory Coast and Vietnam have raised about $37 billion from selling bonds, roughly 50% more than in the whole of 2013 and the highest on record, according to data provider Dealogic.

Kenya is Tuesday seeking to increase the size of its debut dollar bonds it issued in June, following details that Ethiopia is poised to meet with investors ahead of its first-ever dollar bond sale. Pakistan is also Tuesday pressing ahead with plans to sell Islamic law bonds, which could be wrapped up as soon as Wednesday.

Demand is still looking good for this type of debt,” said Kevin Daly, an emerging-market fund manager at Aberdeen Asset Management in London.

Mr. Daly said he is considering buying some of Kenya’s bonds Tuesday and is planning to meet with officials from Ethiopia Wednesday.

African debt has performed strongly this year despite a minor blip last month, triggered by tumbling oil prices and concerns about the Ebola outbreak. On average, African government bonds yield 5.25%, roughly 0.75 percentage point lower than at the start of the year, according to a JPMorgan index. Yields fall when bond prices rise. That has lifted total returns—which include price changes and interest payments—to almost 12%.

Meantime, Pakistan’s bonds yield 6.84% on average, about 1 percentage point lower than at the start of the year, according to a Markit index.

Bankers working on the Kenya deal are suggesting the bonds will price to yield in the area of 5.25% for the debt maturing in 2019 and around 6.125% for the debt maturing in 2024. Those bonds are currently trading at yields of about 5% and 5.8% respectively, according to Tradeweb. The original sale in June raised Kenya $2 billion, and was one of the largest first-time issues from an African nation.

Ethiopia’s investor meetings are due to start Wednesday and conclude Dec. 3., according to a person familiar with the matter.

Pakistan’s Sharia-compliant five-year bond—or sukuk—is being marketed at a yield in the area of 6.875%, according to a banker working on the sale.

The deal follows a number of other countries such as South Africa and the U.K. that have issued sukuk in recent months. Tunisia and Kenya are also both eyeing that market, investors say.

Sukuk paper trades, clears, settles and is rated in a similar way to non-Sharia compliant bonds, but is structured to abide by Islamic law. This means it is usually backed by assets or cash flows, as the religion forbids interest payments. As a result, sukuk issuers are able to tap a different pool of investors than with more conventional bonds.

Pakistan’s sukuk is expected to be rated Caa1 by Moody’s Investors Service , seven levels below investment grade.

Ethiopia in May was handed credit ratings from Moody’s, Standard & Poor’s Corp. and Fitch Ratings in preparation for a potential deal. The country is rated B1 by Moody’s and B by S&P and Fitch, four and five levels below investment grade respectively. Moody’s said at the time that its rating reflects Ethiopia’s strong economic growth over the past decade.

Kenya is rated B1 by Moody’s and B+ by S&P and Fitch.

Barclays, J.P. Morgan Chase & Co. and Standard Chartered are managing Kenya’s debt sale Tuesday.

Citigroup , Deutsche Bank , Dubai Islamic Bank and Standard Chartered are running the Pakistan sukuk sale.

Deutsche Bank and J.P. Morgan are organizing the Ethiopia bond roadshow.

Write to Ben Edwards at and Josie Cox at



Ethiopia Plans Debut Dollar-Bond Joining Ghana, Kenya

By Lyubov Pronina Nov 25, 2014 7:08 AM PT

Ethiopia plans to sell its first dollar bond as Africa’s fastest-growing economy exploits record demand for the continent’s debt.

Ethiopia picked Deutsche Bank AG and JPMorgan Chase & Co. for fixed-income investor meetings in Europe and the U.S. beginning tomorrow, according to a person familiar with the matter, who asked not to be identified as the information is private. The proceeds of the sale will be used to fund electricity, railway and sugar-industry projects, Finance Minister Sufian Ahmed said Oct. 8.

The Horn of Africa nation is joining issuers, including Ghana, Kenya, Senegal and Ivory Coast, who sold what Standard Bank Group Ltd. says is a record $15 billion of Eurobonds this year. Government and corporate issuers are seeking to benefit from investor appetite for higher returns before the Federal Reserve raises interest rates as soon as next year.

“There is an incentive to issue before U.S. rates start to gradually edge up from next year,” Samir Gadio, head of African strategy at Standard Chartered Plc in London, said today by e-mail. “The market seems to expect that Ethiopia will price among the highest-yielding African sovereigns.”

African government and corporate Eurobonds sales this year beat 2013’s record $14 billion, Standard Bank said on Nov. 13. Sovereigns accounted for about 71 percent of issuance, according to the Johannesburg-based lender.

African Returns

The yield on Kenyan dollar bonds due June 2024 was at 5.91 percent today, down from 6.88 percent when it was sold in June. Zambian dollar bonds returned almost 17 percent this year, while Ghanaian debt earned 9.5 percent, according to the Bloomberg USD Emerging Market Sovereign Bond Index. (BEMS) Ivory Coast returned 1.3 percent as neighboring countries battled an outbreak of Ebola, while Gabon earned about 11 percent.

Emerging-market assets have benefited from record-low interest rates in developed nations that pushed investors to seek out higher returns elsewhere. The end of quantitative easing by the Fed and the prospect of its first interest-rate increase since 2006 is drawing some of that money back to the U.S.

Almost 30 years after pictures of Ethiopian children with distended stomachs were used to raise money by Bob Geldof and Live Aid, the country is growing faster than any other African economy, at an average of 10.9 percent over the past decade, International Monetary Fund data shows.

Credit Rating

Ethiopia was assigned its first credit ratings in May. Moody’s Investors Service rates it a non-investment grade B1 with a stable outlook, while Standard & Poor’s gave the East African country a B rating. The country is Africa’s biggest coffee producer and the continent’s second-most populous nation after Nigeria.

Ethiopia’s planned issue could be assisted by technical factors, such as scarcity, as the Eurobond will be the only tradable asset for international investors wanting access to the African nation, Standard Chartered’s Gadio said.

State Minister of Finance Abraham Tekeste and Haji Ibsa, a spokesman for the Finance Ministry, didn’t answer their mobile phones when Bloomberg called each of them seeking comment today.

Ethiopia is building the continent’s biggest hydropower plant on the Blue Nile River, known as the Grand Ethiopian Renaissance Dam, that will probably increase electricity supply five-fold by 2020. It may need to invest about $50 billion in infrastructure over the next five years, of which $10 billion to $15 billion may come from foreign investors, the finance minister said last month.

(An earlier version of this story was corrected to show that record Eurobond sales of $14 billion were in 2013.)

To contact the reporter on this story: Lyubov Pronina in London at

To contact the editors responsible for this story: Daliah Merzaban at Matthew Brown, Stephen Kirkland




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