Standard Bank Group (SBG) has partnered the Namibian government in the issue of its debut US$500-million, 10-year Eurobond, as sub-Saharan sovereigns increasingly tap into international capital markets.
Namibia's 144A/RegS benchmark sovereign bond issued on 27 October 2011 carries a coupon of 5.5% and is rated Baa3 by Moody's and BBB- by Fitch. This new issue for the Republic of Namibia is only the sixth benchmark sovereign bond to come to market from Sub-Saharan Africa (excluding South Africa) in the past few years.
Standard Bank Group and Barclays Capital served as joint book-runners on this landmark transaction.
Standard Bank Group is a leading advisor to African governments and corporates seeking to access the international debt markets and a leading market maker of African Eurobonds in the secondary market. In the year to date, Standard Bank Group has served as a joint book-runner on two of the six Eurobond transactions that have come to market from Sub-Saharan Africa, more than any other international bank.
Gabon and Ghana were first to follow South Africa's lead into the sub-Saharan Africa Eurobond space with issues in late 2007. Senegal then followed suit in 2009 and Nigeria in early 2011. In May this year, Senegal issued its second sovereign bond, but broke new ground by successfully concluding a joint bond issue and exchange.
While Sovereign Bond issues have historically been limited to the more developed economies in Northern Africa and South Africa, more Sub-Saharan economies are tapping into international capital markets.as they develop more robust fiscal, institutional and regulatory environments, more economies.
In June, Standard Bank Group also facilitated a $250-million seven-year loan to the Tanzanian government, which was raised through various regional and international financiers.
Says Peter Baillargeon of Standard Bank Group's Debt Capital Markets Africa desk in London: "African economies urgently need to address the gaps in their infrastructure, especially in the areas such as energy and transport. This is where long-term sovereign bonds can play an integral role. Our involvement with a number of sovereign transactions demonstrates Standard Bank's capabilities to successfully facilitate complicated transactions of this nature.
"We are proving that we have the required expertise and capacity to help African sovereigns as well as corporate entities to raise debt in international capital markets."
The marketing process for the Namibian debut transaction began on 27 September 2011 with a five-day international road show of two teams of senior officials from the Ministry of Finance and Bank of Namibia.
Namibia's Minister of Finance, Sara Kuugongelwa-Amadhila, and the Governor of the Central Bank, Ipumbu Shiimi led the delegations on a series of investor meetings in Los Angeles, San Francisco, Boston, New York, Zurich, Geneva, Frankfurt, Munich and London.
Investors expressed interest in a sovereign debt offering from Namibia during the road show citing Namibia's economic fundamentals. In particular, Namibia has a low government debt to GDP ratio of 17% (at 1 September 2011) and real GDP growth rates of 6.6% in 2010 and forecasts of 5.8% for 2011. However, global market uncertainty and volatility caused primarily by the Eurozone debt crisis prompted Namibia to postpone a transaction until market volatility subsided and a potential resolution to the Eurozone crisis became more apparent.
A global market rally in risk assets following the conclusion of the EU leaders' summit on 26 October provided strong market support and enabled the joint book-runners to announce the debut transaction. The joint book-runners released price guidance to the market on the morning of Thursday 27 October of a reoffer yield of between 5.75% and 6.00%.
Investor interest built quickly across Europe, Asia and the US over the course of the morning and early afternoon. The investor response allowed the joint book-runners to launch the transaction at the tight end of price guidance by mid-afternoon on Thursday with a reoffer yield of 5.75%.
The order book for the new issue included over 160 leading US, European and Asian institutional investors. Fund managers and asset managers accounted for the vast majority of the investors in the new bond representing over 50% of orders by volume. The transaction also achieved a broad geographic representation with UK accounts representing roughly 40% of orders, the US about 25%, continental Europe around 30% and Asia about 5%.
"Namibia's debut Eurobond has been well received by international investors" said Carl Piccolo, Head of International Debt Syndicate at Standard Bank in London. "This transaction provides Namibia with a very broad international investor base consisting of a number of the leading emerging market investors and is expected to serve as a liquid market benchmark to support international funding requirements for the government as well as the corporate sector going forward."
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