By Michael Turner
The Federal Democratic Republic of Ethiopia hit screens on Tuesday with a debut dollar bond roadshow announcement minutes before Kenya announced a tap of its outstanding US$500m 5.875% 2019s and US$1.5bn 6.875% 2024s.
“It’s not ideal,” said a source. “If someone asked you whether you’d want two East African names in the market at a similar time, you’d probably say ‘no’.”
But it helps that neither economy is particularly dependent on oil prices, which have hit multi-year lows in recent weeks, the source added.
A bond banker away from either deal argued that the Kenya tap should not have a detrimental affect on Ethiopia’s deal.
“Kenya will be done and dusted long before Ethiopia comes,” added the bond official.
Deutsche Bank and JP Morgan, which is also on the Kenya tap, have been hired by Ethiopia to organise a series of fixed income investor meetings across Europe and the US starting Wednesday.
BNP Paribas was also rumoured to be on the mandate, IFR reported on October 16. The French bank declined to comment.
Ethiopia (B1/B/B) is thought to be looking to raise around US$1bn through a 10-year note, according to a source away from the trade. The deal will be 144A/Reg S.
Ivory Coast (B1/NR/B) is one close comparable, according two bond officials away from the Ethiopia deal. Ivory Coast’s US$750m 2024s were trading at a Z-spread of 341bp on Tuesday morning, according to Tradeweb.
Rwanda’s (NR/B/B) 2023s, which were trading at Z+384bp on Tuesday, and Nigeria’s (Ba3/BBB-/BBB-) 2023s, trading at Z+329bp, are also comparables, added another source.
Meanwhile, higher-rated Kenya (NR/B+/B+) will also likely be used as a comparable.
Kenya’s 2024s were trading at a Z-spread of 350bp at Tuesday open. This spiked to Z+362bp immediately after the tap announcement, while the 2019s started the day at a spread of Z+333bp before rising to Z+339bp, according to Tradeweb.
One banker away from both the Ethiopia and Kenya deals said the former could be positioned to come inside the latter, despite its lower rating. However, another banker said, if Ethiopia does price inside Kenya that would be because of technicals – with Ethiopia’s bond likely to be much smaller than Kenya’s outstanding 2024s – rather than a reflection of credit fundamentals.
By Michael Turner