Zambia’s debut 10-year $500m Eurobond was assigned a B+ rating by both S&P and Fitch earlier yesterday. The bond is expected to be issued anytime from yesterday after marketing roadshows took place this week in both London and the US, according to Reuters.
In assigning the rating, Fitch cited Zambia’s political stability, combined with a decade of growth above 6% thanks to a stable macroeconomic environment and policy reforms. The country’s vibrant copper mining sector and overall fiscal discipline were also mentioned as key strengths.
On its part S&P highlighted Zambia’s promising investment and economic growth trends, a fairly strong external balance sheet, and moderate general government debt.
Going forward though, risks remain and explain the negative outlook placed on the rating. On its part, Fitch cited the risks posed by a potential failure to curb current expenditure, particularly on wages, which consume 43% of government revenue; while S&P mentioned the increased economic policy uncertainty since the new administration took office.
Most eyes will be on whether the yield on the Eurobond will come in line with Ghana, also rated B+. Reuters citing analysts mentioned the yield could come in the 5.5-7.5% range, so at premium with
Ghana’s 8.5% 2017 dollar-denominated Eurobond, currently at around 4.75%. We would agree with the view that the yield is likely to come at premium to Ghana’s, because of Zambia’s current high vulnerability to slowing China, a key market for its copper exports.
Meanwhile reuters reports that Zambia has issued guidance for its debut 10-year Eurobond, expected to be at least $500 million, indicating a yield of 5.875 percent, IFR said on today.
The deal from Africa’s biggest copper producer is likely to price later on Thursday, IFR reported. Barclays Plc and Deutsche Bank are the lead managers.
Zambia, which is rated B+ by Fitch and Standard and Poor’s, plans to use proceeds from the issue to upgrade its infrastructure, particularly in the transport and energy sectors.
The indicated yield places Zambia in between Ghana, whose 2017 Eurobond is trading at around 5 percent, and Senegal, whose 2021 issue is currently yielding 6.3 percent.
Ghana, a gold, cocoa and oil producer, is rated B by Standard and Poor’s and B+ by Fitch but is more familiar to investors as it issued its Eurobond in 2007. Senegal, another stable west African country, is rated B+.
“This is a reflection of the scarcity of African assets, particularly Zambian assets, as well as healthy global risk appetite,” said Yvette Babb, emerging markets analyst at Standard Bank.
“It looks expensive for investors, but for the Ministry Finance these are fairly attractive levels considering their significant infrastructure development plans.”
[Reuters]
Standard and fools
So if PF was doing things right, Zambia would be rated better than B+. PF needs to pull up its socks, if it has any.
Where is the money going? Infrastucture or pockets?
Alot in the pockets and just a little for some projects
Well done guys.WO ka Heichi Heichi .
Well, as a PhD student, i would urge you to disregard this report Fitch are not worldwide recognised and besides there is not many countries worse than B+
As a matter of fact the poorest 10 AFrican countries in AFrica , Zambia is one of them.
Thanks
Let the bond be bought and the you PF must improve the infrastructure and not stealing as the MMD did. Show us that you can deliver and out votes shall be yours come 2016.
The MMD didn’t steal. Quite interesting the so called non stealing PF has failed to improve on anything. The credit rating that has been maintained at B+ and the bond have both been inherited from the MMD. So what exactly has PF done? The answer is: Nothing!
Timing. One has to say good luck. If it’s got to be done then let it be done to the benefit of all.
This is certainly a plus for the PF Government. They have certainly proved the critics including that dumb-is-a moyo paid critic that their better economic managers than the corrupt MMD and the tribal party. Zambia is on course to economic prosperity and the PF will be in power for the next 20 years because they will definately deliver to the people. Viva Michael Sata, Viva PF
B+ thanks to MMD
After 10 years of advocating for this, it is finally interesting to see it come to pass. It is time to develop our fantastic franchise into a world-class economy and you only do that once you start playing at the bond market level. Unemployment down.
The smart people of the Zambian Enterprise are looking forward to massive infrastructure projects, new schools, new universities, highways, hospitals and bridges all built with a revenue incentive in mind.
Remember that we have to pay that money back in 10 years before we issue new bonds and so, our projections on every project should have a 23% hurdle rate or better that way our internal rate of revenues would be in line with our return on investment. We can couple this with Quantitative Easing (QE) and the rest will be history.
It is indeed fantastic. We however have to ensure that we fight corruption so that most of this money going into infrastructure development does not end up in individual people’s pockets.
This is what the Lusaka Times of 13th September,2011 reported. “The World Bank has reclassified Zambia as a middle-income country,along with Ghana. The World Bank says the upward adjustment in Zambia’s income growth is a result of foreign aid-driven interventions and surging prices of copper in the last few decades. This is contained in yesterday’s edition of the United Kingdom-based newspaper, The Guardian.” Did the Lusaka Times lie? Ba Phd student has Zambia lost its lower middle income status to become one of the 10 poorest countries in Africa in just a year? A lot of people should be ashamed but I know they won’t because it was only a few days ago that they were saying that the PF government has failed to sell the bonds.
$500 million is not loads of cash. To put it in perspective, its only 2% of what facebook is worth.
It can only do 2 genreral hospitals and 2 100KM roads. Assuming PF will pocket some of it and the Vendor banks Barclays and Due will make a big cut, $500 million is a pittance. Its Twice HH’s wealth and for a nation, this is too little
The idea of raising funds for infrastructural development is a damn good idea whichever party implements it so long as it used for the intended purpose and not for consumption as haappened KK’s era or into people pockets.
Good for Z
Why should this excite me? What trickle down effects will the poor Zambian feel with this B+ or A+ watever. Its like inflation at 7% and yet prices are still high, the poor arent better off. Things still getting worse. Am not an Economist but bliev u me thez are assumptions with minimal if not any effect on the 80% majority poor!!!!!!!!!!!!!!!!!!!!!!!!!!!!! Afterall the PF criticized this and i remember very well Kabimba saying this has no effect on the poor..
B+ Rating from both rating agencies is a very good rating just before we offload the bond on the capital markets. Unfortunately, for some short sighted Zambians, this is bad news as all they want to peddle in are negatives, sorry, let us applaud this as a country and let Government address aspects of a clear economic policy!!!!
Tonga heads should be exploding with envy as they were praying for the failure of this issue-literally talking down the issue and the economy-
HAHA GOOD, ZW, WONT WRITE THIS,VIVA ZAMBIA…….
Again am concerned with some comments before getting the fact. This doesn’t mean Zambia will get that money, but simply means credit rating assessing the credit worthiness of the country or government. If you further read the article it further says ” Going forward though, risks remain and explain the negative outlook placed on the rating. On its part, Fitch cited the risks posed by a potential failure to curb current expenditure, particularly on wages, which consume 43% of government revenue; while S&P mentioned the increased economic policy uncertainty since the new administration took office” so there is not so much to be exited about..
So how do you buy some of this bond . Through our treasury dept. can you get more info?
Has anyone thought of why the euro-zone is in trouble? All those countries had better than AA+ rating at some point in the recent past and they went to town and borrowed but when pay back time came what happened? Greece is a basket case already they have basically defaulted on two occasions except the ECB has had to bail them out on both occasions.
Credit rating is nothing to talk about its the way this money will be used that matters because it has to generate enough money to pay back the bond holders. Now NOTE one of the risks they have pointed out is the Budget 43% goes to pay unproductive civil servants seminars and wages. This is one of the problems Greece also faces and hence being asked to cut down government expenses. If Zambia fails to pay it will be declared bankrupt.
Let’s see how much will be raised – just because it has been issued does not guarantee the bonds will be bought / taken up.
As others have stated, this is not a great deal of money and more importantly, it is MMD’s doing not PF. But i do hope the bond issue goes well.
Breaking News Zambia’s debut eurobond oversubscribed
I don’t expect much blogging here for one simple reason…too technical for most bloggers
I’m surprised of bloggers celebrating of being indebted.
@22 hahahahaha , some of the bloggers are saying the two rating agencies are not known world wide. you are right my bro
Zambia’s debut eurobond oversubscribed
ZAMBIA has successfully sold the country’s debut euro-bond at US $750 million bond, up
from the initially planned US $500 million as investors confident in the country’s economic policies scrambled for rare African paper.
The 10-year Eurobond with a yield of 5.625 percent yesterday was described by market sources as a huge success and that more than US $11 billion of orders were received for the issue.
“The popularity of the issue by Africa’s biggest copper producer reflects strong investor appetite for scarce frontier African paper,” according to Reuters. “The yield was 25 basis points tighter than
Zambia’s initial 5.875 percent guidance.”
This should serve as a bold statement to all you skeptics!
People get one thing clear all what this mean is like what happens when an individual wants to get a loan at the bank. the bank will measure your capacity to pay back the loan and interest. so this what this B+ rating is all about. Not that we are going to get this E500.
Get one thing clear all what this mean is like what happens when an individual wants to get a loan at the bank. the bank will measure your capacity to pay back the loan and interest. so this what this B+ rating is all about. Not that we are going to get this E500.
Great news even though we are gonna need to pay back the money. Zambia needs to be transformed into a functional economy where banks are at the centre of it and the money should be used wisely. Build motor ways and put electronic toll gate systems for road users to pay every time they use the road those are some of the ways that money will be paid back. Have a good and workable road tax system and for goodness sake don’t let the polie handle cash for traffic fines. I have never seen a country where police handle cash, maybe I need to visit some more African countries. Build a good railway net work and have a few more runways on the airports. When people and goods are moving efficiently, you have a healthy economy. Put simply, invest it in capital expenditure and no refurbishing offices.
nothing is free of charge in this world
This is certainly a great move towards progress. The ability for countries to borrow and pay back money is a crucial part to development. This is not small money so the government has to understand that it has to be paid, they should not put up the future of our nation as collateral; they need to use the money wisely and pay it off according to the dictates of the capital markets.. Im certain this development and its repayment will make sure that Zambia’s rating increases. George Mtonga, Associate, GMCH Capital Group Inc.
Mushota,
As a History of Archeology PhD student please take your insufficient knowledge to a museum in Mongu and stop lecturing us on financial markets. you can comment on HH’s under five mentality but leave real issues to ream men and women.
Whats good is good,why kalijo,isn’t this what we want people?They do bad you condemn,they do good you complain,what do you want you morons.
‘In assigning the rating, Fitch cited Zambia’s political stability, combined with a decade of growth above 6% thanks to a stable macroeconomic environment and policy reforms.’
MMD managed a decade of 6% + growth year by year, I hope PF dont mess with this progress.
Congratulations to MMD for securing this euro bond!
Some of the creatures of Zambia are very useless and dull. Your main aim is see PF government fail. Why always being negative even when some thing is good? Just appreciate any thing which is good for Zambia than always showing your bitterness and frustration. This is dullness and stupidity. The Bond market says Zambian is fit to get the E500 million bond but what we hear from creatures are negative comments that this shall not happen. What kind of creatures are you?? Very dull ones I guess.
In the midst of all these figures and prognoses, it is important that our government remains focused on it’s development agenda and does not allow any influence on their operations.
A rating agency is nothing more than a person who grabs your watch and tells you what time it is.
I thought MMD chaps were referring to us PF as CNP….one year in office this report wouldn’t have spring up if we were CNP……..prudence will teach most frustrated MMD supportors if any still……you want us to announce everything we are doing so your big mouths exercise on insults…Dont Kubeba….welalila…lol….VIVA PF…VIVA Sata