Ethiopia becomes poorest country to issue bond

 
Ollie Gordon
Ethiopian Prime Minister Hailemariam Desalegn and German Chancellor Angela Merkel (Source: Getty)

The government of Ethiopia has launched its first ever dollar bond, becoming the poorest country ever to raise money in the international sovereign market, it was revealed yesterday.

The bond is for $1bn (£638m) and has a term of 10 years.

It also has the relatively low yield of 6.625 per cent – only one per cent more Kenya’s comparable 10-year bond, which is trading at 5.84 per cent.

Rated B1 by Moody’s and B by Standard & Poor’s, the sovereign initially began marketing the bond at 6.75 per cent. JP Morgan and Deutsche Bank are acting as arrangers on the deal.

The East-African country has a GDP per capita of under $550 per annum, making it poorer than the other frontier African bond issuers, Mozambique and Rwanda. Ethiopia GDP growth hit an estimated 8.2 per cent this year, according to the IMF.

The issuance serves as another boon for the continent, which only just witnessed the $2bn debt issue from Kenya in June – one of the Africa’s largest ever debut issuances.

Experts believe the low yield of Ethiopia’s new bond shows how an ultra-relaxed monetary policy in Europe, the US and Japan has allowed countries at the foot of the frontier category to access the market at relatively little expense.

The issue will take bond sales for the frontier section of the market this year to a record-high $40bn, according to Dealogic data.

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