A FTSE 250 company based in the UK is not the most obvious candidate to stimulate Africa’s corporate bond market. However bankers hope that oil company Afren’s transaction in late January is a much-needed wake-up call.
Although the oil exploration and production firm is headquartered in London, its business is purely African, with its biggest assets in Nigeria.
On January 27, it launched a $450 million, five-year senior secured bond, becoming the first sub-Saharan Africa corporate to borrow in the international capital markets.
The bonds, which were rated B– by Standard & Poor’s and B by Fitch, were priced to yield 11.75% and carried a coupon of 11.5%.
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| Afren’s five-year senior secured bond’s order book for a $450mln offering |
Those numbers proved enticing to investors desperate for yield, with the order book reaching $1 billion. Dedicated emerging markets funds accounted for about 85% of the bonds, with high-yield funds taking the rest. US and UK investors bought 80%, with the rest split between buyers from continental Europe, Africa and Asia.
Despite its junk-bond rating – largely based on its geopolitical risk and the fact that oil exploration is a hit-and-miss business – Afren is conservatively run.