Rwanda Issues First 10-year Bond To International Investors

Rwanda is issuing its first international bond, highlighting its recovery after the 1994 genocide and how voracious investor appetite for higher yielding debt is helping a swath of countries make their debuts on global bond markets.

Rwandan President Paul Kagame
Rwandan President Paul Kagame

Rwanda under President Paul Kagame has recorded tremendous achievements that have enabled it to recover from the 1994 genocides that claimed the lives close to a million ethnic Tutsis and moderate Hutus.

Economic growth in the central African country has averaged almost 8 per cent since 2003, and inflation has been subdued.This buoyant performance has caught the eye of international investors eager to bet on both Rwanda and the wider economic resurgence of sub-Saharan Africa.

As a result, Rwanda is raising $400m by issuing a 10-year bond to international investors. Order books opened on Wednesday but bankers expected the final price to be announced yesterday (Thursday).

People close to the deal noted that investors seemed undeterred by the fact that the size of the bond would exclude it from influential bond indices – which typically require a minimum “benchmark” size of $500m. They said the bond could yield below 7 per cent on issuance, comfortably below the initial guidance.

Rwanda has capped the size of its bond sale to $400m and will use the proceeds to repay several government loans, complete the construction of a convention centre in the capital Kigali, and finance a hydro-power project.

“Limiting the size of the bond is in keeping with the prudent policies of the country,” said a person close to the deal. “They’re doing this size because it is what they need, they don’t want to be index tourists.”

The central African country is still highly dependent on foreign aid, some of which was withheld last year over concerns over President Kagame’s government’s human rights record and in particular that it was backing a rebel group in the neighbouring Democratic Republic of Congo.

Nonetheless, fund managers have become increasingly willing to ignore spotty creditworthiness as investors have poured money into emerging market debt-focused funds in recent years, seeking succour from low yields in developed markets.

That has clipped borrowing costs for governments and companies in emerging markets to record lows, and triggered a bond sale spree. There has been about $400bn of bond sales in emerging markets already this year, the highest on record according to Dealogic.

In addition to Rwanda, countries that have sold inaugural bonds recently include Honduras, Angola, Paraguay, Mongolia, Zambia, Albania, Montenegro and Bolivia. African bonds have proven particularly popular with investors, as the continent has emerged as one of the faster-growing regions in the world.

“The supply and demand is immense” for emerging market bonds, said Nick Darrant, a banker at BNP Paribas, which along with Citigroup is managing the Rwanda bond sale. “It’s a ‘Field of Dreams’ scenario. Sell it and they will buy.”

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