Saturday, April 28, 2018

Angola Turns to Bond Markets to Support Public Finances
By Sudip Roy

LONDON, April 27 (IFR) - Angola is meeting investors ahead of what would be only the second international bond from the oil-rich African sovereign.

Officials are marketing the country to accounts in New York, Boston and London ahead of a 10-year US dollar bond and potentially a tranche with a longer tenor that is likely to price this week.

In the US dollar market, Egypt (B3/B-/B) raised US$4bn in February, while Nigeria (B2/B/B+) issued US$2.5bn and Kenya (B+/B+) US$2bn the same month.

Like Angola, each of those sovereigns has big economic and financial challenges but the healthy yields on offer and index-eligibility helped build big books.

Kenya, for example, garnered peak orders of US$14bn for its deal comprising 10-year and 30-year bonds. The 10-year tranche priced at a yield of 7.25%, while the 30-year came at 8.25%. The February 2028s are now bid at 6.70%.

Angola has one bond outstanding - the US$1.5bn 9.50% November 2025s, which are quoted at 7.03% bid, according to Thomson Reuters, albeit that is based off a high cash price of 114.25.

The country's prospects are looking up, according to the IMF, thanks to the rebound in oil prices and steps taken by President Joao Lourenco to stabilise the economy since he took up office in September.


In an Article IV statement in March, the IMF said the economy was experiencing a "mild recovery", while the administration was focused on "improving governance".

The IMF forecast growth to hit 2.25% this year from 1% in 2017, and backed the government's efforts to cut the fiscal deficit and public debt burden, which stood at 6% and 64% of GDP, respectively, in 2017.

It said that Angola's fiscal goals would be achieved by "ongoing efforts to enlarge the tax base, including by introducing a VAT on January 1 2019, as planned; and rationalising public spending".

The IMF does not have a formal programme with Angola but earlier this month the Luanda government said it had requested non-financial assistance from the multilateral to help it implement economic reforms, through a so-called Policy Coordination Instrument agreement.

Lourenco became president last year replacing Jose Eduardo dos Santos, whose 38 years of rule became plagued by charges of corruption.

Lourenco has vowed to tackle the problem. On Monday he sacked the chief of staff of the armed forces and the head of the foreign intelligence agency as part of these efforts.

Lourenco is also trying to revive the fortunes of state-owned oil company Sonangol, which was run by dos Santos's daughter Isabel.

Lourenco replaced her shortly after taking office with the new management tasked with cutting costs and overseeing the repayment of US$3bn of debt owed to Chinese lenders plus another US$3bn owed to oil majors, contractors and traders.

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