Cote d’Ivoire takes bold step with its new Eurobond to finance infrastructure expansion and promote growth

Originally commissioned February 2015

Cote d’Ivoire announced a 1 billion dollar Eurobond in February of this year. The second in two years for Cote d’Ivoire, it is the first Sub-Saharan African country to announce a debt bond this year. The bond, initially planned for 500 million dollars, was raised after the unexpected levels of interest on the part of international investors. The bond was four-times oversubscribed at its launch, attracting 4 billion dollars-worth of interest, and was fully subscribed in less than four hours. The up-take of a debt bond is a good indicator of the perceived health of a given market. Thus, it would be fair to read this as a vote of confidence in the Ivorien economy. Cote d’Ivoire is bucking the trend for a region elsewhere struggling with falling oil revenues.

Cote d’Ivoire’s rating with Fitch increased to BB+ last year. The ratings agency pointed to significant progress in the country, along with a stronger level of investment and important economic reforms, justifying its decision. Maintaining the same rating for Cote d’Ivoire’s new Eurobond, Fitch cited the country’s GDP growth of 8.7% in 2013 and an estimated 8-10% in 2014. Cote d’Ivoire is predicted to see double digit growth this year, which the country’s elite claim will continue for years to come.

Increasing investor interest in West Africa

Cote d’Ivoire’s third Eurobond gives a sense of the increasing investor appetite for debt in African countries. Cote d’Ivoire, like a number of other countries, is using debt purchasing to drive capital markets growth. A number of Cote d’Ivoire’s impressive infrastructure projects have been achieved with credit financing. And improved infrastructure is a good driver of growth. However, the IMF has warned against issuing too many debt bonds, as potential unpredictable obstacles to making the repayments can arise, such as exchange rate fluctuations.

The World Bank has also raised some concerns. Cote d’Ivoire’s politicians have reportedly corresponded with both organizations regarding these concerns and the country has used its loan facility relatively sparingly, using 750 million of its 4 billion USD total loan facility in 2013 and 1 billion of its 3.7 billion dollar loan facility last year. Nevertheless, Cote d’Ivoire must be proactive in ensuring the funds acquired are used to drive the growth needed to make repayments effectively, otherwise there is a risk of the country’s hard-won confidence being undermined.

Cote d’Ivoire puts its cards on the table

Tunisia, Cameroun, Angola have following Cote d’Ivoire’s example and this year themselves raised similar-sized bonds. Ivorien bonds are now the largest in sub-Saharan Africa after Kenya which has bonds worth 2.75 billion dollars. The bond was mostly taken up by investors from the English-speaking world, despite being a Francophone country. Secondly, the appetite was high, despite the fact that analysts at investment funds do not traditionally give permission to their funds to buy up bonds with a ‘B’ rating. Commentators have suggested, portfolio managers are now going around the economists to buy up debt issuances. This new bond reflects considerable confidence in Cote d’Ivoire’s potential. However, Cote d’Ivoire, having taken this step, must follow through to ensure continued success.

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