Zambia has completed its first international bond issue, with demand far outstripping supply as investors continue to seek exposure to emerging market debt.
The 10-year bond was issued on September 13, priced at 5.625%. The government originally planned to raise $500 million but high levels of interest led it to increase the target to $750 million. Barclays and Deutsche Bank, the joint lead managers and bookrunners, say they received more than 425 orders worth $12 billion.
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"The appetite for emerging market debt has been high all year," says John Wright, of the London syndicate team at Barclays. "Investors are increasingly willing to look further afield for what is rare in today’s market: strong growth prospects and yield." He adds that the strong order book "enabled Zambia to price well inside initial expectations of low 6%".
Zambia joins other recent Eurobond issuers from the region, including Gabon, Ghana, Namibia, Nigeria and Senegal.
Analysts say the level of demand for Zambia’s bond was far higher than expected. "The extent of the interest was a surprise," says Carmen Altenkirch, an analyst at Fitch Ratings. "It highlights that people are desperate for a slice of the action."
Buyers from the US took up 56% of the bond issue after an investor roadshow in London, Los Angeles, San Francisco, Boston and New York. The remainder was bought by European investors (40%), Asian (3%) and others at 1%. In terms of sectors, fund managers received 85% of allocations, followed by banks with 8%, pension and insurance funds with 5% and others at 2%.
As well as the interest in emerging markets generally, demand was also fuelled by Zambia’s own buoyant economy, which the IMF expects to grow by 7.7% this year.
Expectations surpassed
Zambia’s finance minister, Alexander Chikwanda, issued a statement on September 14 saying "our expectations have been surpassed" with the issue and hinted more could follow. "The development process of Zambia will incline us ever more to seek recourse to the international markets," he said.
Standard & Poor’s and Fitch Ratings assigned a rating of B+ to the bond, the same as the country’s long-term foreign currency rating.