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Huge demand for Ghana's debut Eurobond
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Business News of Thursday, 27 September 2007

Source: Reuters

Huge demand for Ghana's debut Eurobond

LONDON (Reuters) - Ghana sold a $750 million Eurobond Thursday, with order books testifying to abundant appetite for the debut bond from the West African country and possibly for future issues from the continent.

The 10-year dollar bond was sold at par to yield 8.5 percent, the tight end of the guidance given on Wednesday, lead managers Citi and UBS said.

The book size was almost $3 billion with about 40 percent placed to U.S. investors, 36 percent with UK investors and the rest in Europe, officials with the banks said. About 158 accounts bought into the deal, they added.

"We are very happy. This is the first African country other than Egypt, Morocco and South Africa, which has made it on to the international market," Ghana's finance minister Kwadwo Baah-Wiredu, in London for the bond sale, told Reuters.

"We had investors from all over the world and it shows Ghana's story is good. I hope other African countries will be able to succeed as well," he added.

The minister said the proceeds of the bond would be used to improve Ghana's infrastructure and pledged to continue with reforms that have helped speed up economic growth.

Ghana is rated 'B+' by Standard & Poor's and Fitch, a distinctly speculative grade.

The Ghana deal is also significant in that it marks the first foray into global bond markets for a country that had its debts written off as part of a historic 2005 $40 billion debt relief effort for Highly Indebted Poor Countries (HIPC).

"This is the first instance when a country post-HIPC is tapping international capital and we expect it to be the first of many bond issues from African countries," said Razia Khan, economist at Standard Chartered Bank in London.


Ghana's success comes a day after Turkey sold $1.25 billion in 2018 Eurobonds, which were three times oversubscribed.

The two deals show that despite the global liquidity squeeze that is forcing central banks to pump in billions of dollars into money markets and make emergency loans to banks, there is cash on hand to invest in high-yield assets.

"There is appetite for sovereigns," said Kaushik Rudra, emerging debt strategist at Lehman Brothers. "People are differentiating between corporates and sovereigns and have more confidence in the sovereign outlook than the corporate outlook."

Analysts say the order book testifies not only to the attractiveness of the 8.5 percent yield but also to growing confidence in Ghana's economy, which the finance minister said would grow at 6.5 percent this year despite floods and drought.

A recent oil discovery may help consolidate growth. World prices for cocoa and gold, its other main exports, are high.

"The economy stands out because of the speed of economic transition... it has successfully reduced the size of the fiscal deficit and it has the benefits of political stability in its favour despite being in a difficult neighbourhood," Khan added.

Stuart Culverhouse, head of research at Exotix, a subsidiary of ICAP, said dollar debt of the kind issued by Ghana and Turkey was in short supply and an 8.5 percent yield was attractive.

"I'm not surprised it was oversubscribed so heavily," he said. "A new issue from Africa will get into benchmark indices and people will be buying it for tracking purposes as well."

Meanwhile, Ghana's cocoa board raised a $900 million trade finance facility, the largest structured soft commodity syndicated deal in Africa, the organisers of the loan said.

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