Investing in Africa's Future
By BEN EDWARDS
African countries have been selling bonds at a record pace this year, but the latest deal might raise more than a few eyebrows.
Just a couple of weeks after seeking a bailout from the International Monetary Fund, Ghana on Wednesday outlined plans to meet bond investors about borrowing cash from them as well.
The West African country has been trying to fix a ballooning budget deficit while fighting rising inflation and a tumbling currency. Last month, it finally turned to the IMF for help. But that hasn’t deterred Ghana from going ahead with a plan to sell bonds too.
“It’s a little bit confusing as to what they’re playing at,” said Stuart Culverhouse, chief economist and head of research at Exotix, an investment banking brokerage. “I can’t think of a situation where the timing has been like this before. Normally a country would seek an IMF program if it couldn’t borrow in the market. It seems a little bit contradictory to try and do both.”
A 16-strong entourage including Ghana’s Finance Minister Seth Terkper and a host of central bankers, economists and legal advisers will jet off this week to meet investors in Europe and the U.S. about issuing a dollar bond.
Last month, Mr. Terkper told the Wall Street Journal that an IMF package would increase the appeal of a bond offer.
Ghana’s finance ministry didn’t immediately respond to a request for comment on Wednesday.
Ghana previously tapped the market in July last year when it raised $1 billion of 10-year debt at a yield of 8%. That bond is currently yielding about 8.2%, according to Tradeweb.
If Ghana’s anticipated bond issue is priced at a similar level, investors may find it hard to resist. “At other times investors might be more discerning but the low-yield environment we’re in means for some picking up a yield north of 8% for sovereign credit risk is an attractive proposition,” said Mark Baker, a fund manager at Standard Life Investments SL.LN -2.35%.
Mr. Baker added that his funds have steered clear of Ghana’s bonds and have no plans to buy any of the new bonds.
African countries have raised almost $8 billion from global debt sales so far this year, a record pace, according to data provider Dealogic.
The proposed Ghana deal follows recent offerings from Senegal and Ivory Coast, the latter raising $750 million of 10-year debt at a yield of 5.625% despite a checkered recent history that has seen the country suffer two civil wars and two defaults since the turn of the century.
