February 23, 2014

Rwanda Tenders $18.3m Bond To Regional Investors

A gas extraction barge on the shores of Lake Kivu in Karongi District, Western Province. Rwanda is offering $18.3m bond to East African investors to raise funds for development projects in the country. Photo/Cyril Ndegeya
A gas extraction barge on the shores of Lake Kivu in Karongi District, Western Province. Rwanda is offering $18.3m bond to East African investors to raise funds for development projects in the country. Photo/Cyril Ndegeya

Rwanda is banking on investors in East Africa to take up its Rwf12.5 billion ($18.3 million) bond, in line with Kigali’s renewed commitment to revive the bond market to raise money for development projects according to the East African.

A delegation of senior Rwandan government officials — led by the Governor of National Bank of Rwanda (BNR) John Rwangombwa — was in Nairobi on Friday to market the bond, which matures in 2017. The lowest denomination investors will be allowed to buy will be $166.

Details released by the BNR show that the bond will be available to domestic and regional retail and institutional investors, effectively opening up a stream of investors from the EAC.

As for foreign participation, only institutional investors and fund managers will be targeted due to the size of the issue, “which is small by international standards,” said BNR.

“This is just the beginning and these quarterly issues will be targeting not only the East African market but international investors. It is the first time we are looking at the region and the international market to invest in our bond,” said John Rwangombwa, the BNR governor.

The bond will close on February 27 and list on the RSE on March 7. The rate will be market determined with the preference given to the lowest bidder according to Mr Rwangombwa. Yields in past issues have ranged between eight and 11 per cent.

Ministry of Finance data shows that Rwanda’s total public and publicly guaranteed debt is estimated at $2.16 billion, representing 30.2 per cent of the GDP as of June 2013.

The December 2013 Debt Sustainability Analysis published by the International Monetary Fund indicated that Rwanda has a low risk of debt distress and may, therefore, use non-concessional borrowing without unduly affecting debt sustainability.

The government shelved bond activities on the market in 2011 after issuing a total of Rwf31 billion since 2008. However, stockbrokers say that the appetite on the bond market is still low compared with the interest shown on the equity market.

Kenya and Tanzania also plan to issue Eurobonds. The Kenyan bond set for the first quarter of 2014, is expected to reduce government appetite for local borrowing. However, the growing spending pressures as well as the pick-up in economic activity could put pressure on interest rates.

In Tanzania, a Eurobond that was expected this year may have to wait until the next fiscal year due to a delay in getting a risk assessment by Citigroup Inc.

Tanzania had planned to issue $700 million of debt in the current fiscal year, which ends in June. The state plans to offer as much as $950 million in Eurobonds in the 2014-15 budget year, if the sale does not take place this fiscal year, according to the country’s central bank.

Adapted from The EastAfrican

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