9 May 2011
Standard Bank Group joint-book runner for landmark African sovereign transaction
The Republic of Senegal has issued its debut 144A/RegS benchmark sovereign bond.
The US$500-million 10-year new issue carries a coupon of 8.75% and is rated B1 by
Moodys and B+ by Standard & Poors.
This new issue for the Republic of Senegal is only the fifth benchmark sovereign
bond to come to market from sub-Saharan Africa (excluding South Africa).
Standard Bank Group (SBG) and Standard Chartered served as joint-bookrunners on
this landmark transaction.
In conjunction with the new issue, Senegal offered note holders of the Republic's
existing US$200-million RegS Eurobond due in 2014 to exchange all outstanding notes
for new 144A/RegS notes. In addition, Senegal sought the consent of 75% of the existing
note holders to allow the Republic to amend the terms and retire all 2014 notes.
During the marketing process for the new bond, the Minister of Economy and Finance
for the Republic of Senegal Mr. Abdoulaye Diop led a delegation that included members
of the Finance Ministry, the Treasury and the BCEAO, the regional central bank,
on an extensive 8-day investor roadshow to New York,Boston, Los Angeles, Zurich,
Geneva and London. As early preparation for this benchmark transaction, Standard
Bank had also arranged a non-deal roadshow in the US for Senegal in April 2010 that
served to develop key US investor interest in the country's credit story.
Investor interest during the transaction roadshow was strong, particularly from
leading institutional investors which, due to liquidity requirements for new investments,
did not participate in Senegal's prior US$200mn Eurobond offering in 2009.
Following positive investor feedback, the Joint-Book runners releasedprice guidance
to the market on the morning of Wednesday, May 4th for a yield of "9.25% area."
Investor interest grew quickly over the following two days with the order book totalling
US$ 2.4bn by Thursday afternoon. The strong investor response allowed the Joint-Book
runners to price the transaction at the tight end of price guidance at midday on
Friday with a reoffer yield of 9.125%.
The pricing for the new transaction compares favourably to the secondary market
pricing of Senegal's prior Eurobond that traded with a spread to US Treasuries of
675bps with 3.5 years remaining when the new transaction was announced. By comparison,
the new transaction was able to achieve a spread to Treasuries of 596 bps and at
the same time extend Senegal's sovereign credit curve in the international market
by 6.5 years.
The order book for the new issue was of exceptional quality and included over 125
leading US, European and Asian institutional investors. Fund managers and asset
managers accounted for the vast majority of the investors in the new bond with a
Banks were allocated 5% of the new issue, insurance companies 4% and private banks
2%. The transaction also achieved a broad geographicrepresentation of investors
with UK accounts allocated 37% of the new issue, US 30%, continental Europe 29%
and Asia 4%.
A critical challenge of this transaction was to ensure the success of the exchange.
The Joint-Lead Managers were able to source US$ 155mn of theexisting US$ 200mn bond
and thereby achieve the 75% threshold of acceptance by investors to enable Senegal
to retire its existing RegS Eurobond.
Standard Bank Group believes that a consent solicitation of thistype for an Emerging
Market sovereign bond issuer has never previously achieved this level of success.
"Exchanging the illiquid 2014 bond for an index eligible 144A/RegS benchmark dramatically
re-positions Senegal in the international bond market" says Florian von Hartig,
Global Head of Debt Capital Markets at Standard Bank Group in London.
"The new bond provides Senegal with a liquid and broadly subscribed bond which will
serve as a beneficial pricing benchmark for Senegal's future international capital