"Gabon bonds rebound as reduced debt burden cushions coup impact"

" Gabon bonds rebound as reduced debt burden cushions coup impact \r\n\r\nGabon\u2019s dollar bonds rebounded from a two-day slump as the country\u2019s lowered debt-servicing burden and the European Union\u2019s comments on this week\u2019s coup helped to calm investors\u2019 nerves.\r\n\r\nDebt due 2025 rallied 2.4 cents on the dollar and the note maturing in 2031 added 1 cent, for the biggest gains in emerging markets Friday. Indicative data from JPMorgan Chase & Co. signaled the country\u2019s sovereign-risk premium was easing after jumping 265 basis points in the past two days.\r\n\r\nThe central African nation\u2019s debt securities plunged after the military deposed President Ali Bongo in Sub-Saharan Africa\u2019s ninth coup in three years. But the event was distinct from other military takeovers in the region, the EU\u2019s top diplomat said Thursday in comments which helped steady market sentiment. Josep Borrell, the bloc\u2019s foreign policy chief, cautioned against using force to restore civilian rule.\r\n\r\n\u201cThere are military coup d\u2019etats and there are institutional coup d\u2019etats, which don\u2019t use weapons, but if I rig elections to take power, it\u2019s also an irregular way of getting power,\u201d Borrell said in Toledo.\r\n\r\nThe coup had originally blindsided investors who had bought into Gabon\u2019s debt swap just two weeks earlier, lending money on the strength of its marine conservation efforts. But they say the swap also reduced the overall risk in the country\u2019s debt and they\u2019ll wait for the next coupon payment to judge the new administration\u2019s outlook.\r\n\r\n\u201cTechnicals in the Gabon bonds are relatively clean as a lot of the loose paper was taken out by the recent tender,\u201d said Anders Faergemann, a senior money manager at Pinebridge Investments in London. \u201cThe Street was probably neutral coming into the election. Whilst the coup was a left-field event, the Street was able to absorb some of the panic selling on the first day of the news.\u201d\r\n\r\nGabon completed a debt-for-nature swap in mid-August in which it bought back $500 million worth of dollar bonds for $436 million and issued $500 million of fresh debt backed by so-called blue bonds. Investors prioritizing environmental, social and governance norms bought the new securities, including some who would have normally avoided a junk-rated nation like Gabon.\r\n\r\nThe buyback leg of the swap left the country\u2019s coupon payments more manageable, Faergemann said. While the coup itself may lead rating companies to downgrade Gabon\u2019s credit score, that will not be a new signal for investors to change their position, he said.\r\n\r\nThe key drivers of bond performance in the coming months would be Gabon\u2019s progress in its engagement with the International Monetary Fund and a November deadline for payment of the next coupon on the 2031 bond.\r\n\r\nThe coup has intensified the country\u2019s financing challenges because of the risk it poses to economic and political stability, Moody\u2019s Investors Service said in a note to clients. \u201cThe likelihood of economic and financial sanctions being imposed on Gabon, and what shape they would take, remains uncertain at this early stage,\u201d it said."

"Gabon bonds rebound as reduced debt burden cushions coup impact"

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