Eurobond oversubscription eases pressure on C?te d’Ivoire, with continental impact

3 Feb 2024 - By Jon Marks

C?te d’Ivoire’s three times oversubscribed $2.6bn dollar Eurobond issue underlines President Alassane Dramane Ouattara’s reputation for prudent economic management – a status that will add to pressures from supporters for ‘ADO’ to stand for a controversial fourth term – and offers some hope for under-pressure African borrowers who could benefit from renewed access to international capital markets and the relatively attractive interest rates CdI has secured. These issues are expanded on in the first of African Energy’s new Risk management reports.

While a majority of the 30m population was suffering over Africa Cup of Nations (Afcon) host C?te d’Ivoire (CdI)’s unexpectedly poor performance in the continental football tournament’s group stage – to which was later added the Elephants’ unexpected victory on penalties over favourites Senegal – the Ivorian Treasury was more quietly scoring a major continental goal in the international capital markets, by showing that ‘junk’-rated developing nation sovereigns could raise foreign debt in 2024.

CdI’s $2.6bn two-tranche bond issue, launched on 22 January, came after a barren 2023, which was sub-Saharan Africa (SSA)’s first year without any external debt issuance since post-global financial crisis 2009. (The previous SSA bond was raised by South Africa in April 2022.)

Among other milestones, CdI’s nine-year $1.1bn environment, social and governance bond and $1.5bn conventional 13-year paper represented CdI’s first foreign issuance since 2017.

Further details of the issue are included in the first of African Energy’s new Risk management reports (RMRs), which are intended to provide updates, analysis and contexts on key political, social, finance and business, and energy trends in countries across the continent.

CdI succeeded in raising $2.6bn at 6.6% interest despite concern at the estimated $1bn-plus cost of Afcon infrastructure and potentially bitter politicking ahead in the long run-up to a presidential election, scheduled for October 2025. Afcon preparations included the construction of four new stadia and refurbishment of another two in Abidjan, Bouaké, Korhogo, San Pedro and Yamoussoukro, plus road, airport, hotel and hospital repairs and renovation – which involved expensive Chinese debt. Significant amounts of electricity needed to be imported from Ghana.

At a domestic level, the three times oversubscribed issuance served to underline the extent that President Alassane Dramane Ouattara (ADO)’s reputation and economic management continue to benefit CdI in global markets.

The package should help CdI to better manage its debt. The bond memorandum said that, with a successful issue, Abidjan planned a tender to buy back its outstanding 5.125% euro notes due in 2025 and a $300m capped tender to offer its outstanding step-up bonds, which are due to mature in 2032.

Can more borrowers refinance with foreign debt?

The issue was widely reported in the context of a debt crisis that has frightened international debt investors away from Africa. Finnfund saw it as so significant that the Finnish development finance institution issued a press statement on 1 February to celebrate a “successful Eurobond issuance [that] raises hopes for easing Africa’s funding squeeze”. It would help to tackle a liquidity crisis after “financing flows to Africa have dried up”.

Finnfund observed: “Access to the financial markets and the moderation of yield expectations would be extremely important for many African countries, as a record number of Eurobonds issued in the 2010s will mature between 2024 and 2032. If refinancing is not available from the bond markets, many countries are at risk of debt distress, as happened to Zambia in 2020, Ghana in 2022 and Ethiopia in 2023.”

It observed that Tunisia, Egypt and Kenya faced high debt risks – as African Energy warned throughout 2023.

The global interest rate hike cut market access to lower-rated borrowers in the period after Angola and South Africa issued bonds in 2022. Since then, “a surging dollar, tumbling local currencies and a drop-off in Chinese loans to the continent have all raised investor doubts that many hard currency debts could be repaid,” as the London daily Financial Times put it.

In prevailing market conditions, CdI is seen as one of the few credible SSA borrowers – even though it is under a 40-month International Monetary Fund programme – but others are hoping bond markets will reopen to them this year. Moody’s Investors Service has estimated that some $5bn of African foreign currency bonds will become due this year and approximately $6bn in 2025, adding to pressures on sovereigns to secure refinancing at sustainable interest rates.

Political questions for ADO and CdI

The Eurobond is an undoubted success for CdI, but there could be difficult days ahead. Ahead of the scheduled October 2025 presidential election, politicians are manoeuvring for position. The first critical question is whether 82 year-old Ouattara is minded to seek a fourth successive term as head of state.

A technocrat politician in ADO’s mould but from a divergent political faction, former minister turned international businessman Tidjane Thiam, was elected to lead the former ruling, but long in opposition Parti Démocratique de la C?te d’Ivoire (PDCI) on 22 December. Former Prudential and Crédit Suisse chief executive Thiam now faces months of political battles as an election fight unfolds that could pose new questions about CdI’s political stability.

Looking to positives, Ivorians need their Elephants to turn around a torrid start to Afcon – leading to coach Jean-Louis Gasset being sacked on 24 January, in somewhat chaotic circumstances, ahead of the tournament’s knock-out rounds. As sports website The Athletic put it, a portion of the government’s $3.5bn IMF loan “has been put towards organising the competition. They have invested so much that getting knocked out at the group stages would have been a disaster.”

Success on the pitch was still possible for interim coach Emerse Fae’s team, as it prepared for the Afcon quarter finals as African Energy went to press.

Investors – as well as global soccer scouts – are watching sport and the markets. Bloomberg on 30 January reported that real estate investor Cheick Sanankoua (formerly of Merrill Lynch and Helios Investment Partners) and partners were buying a minority stake in Racing Club d’Abidjan, in a three-year, $50m private equity push into African sports.

The government rationalised its Afcon investment as a means of catching up on years of neglect for sports facilities and social infrastructure. Although ADO’s years in power, since 2011, have been marked by infrastructure upgrades and impressive growth figures, even for the world’s biggest cocoa producer it is never enough.

Register an account to access more insights