"Investors eye Ghana, other African countries’ credit comeback"

" Investors eye Ghana, other African countries' credit comeback \r\n\r\nNations in Sub-Saharan Africa have been locked out of international debt markets for 22 months now, and investors increasingly are betting the drought will soon end as countries seek funding for a slew of principal payments coming due this year and next.\r\n\r\nSouth Africa is due to repay $1.5 billion in bonds this month, while Kenya has a $2 billion maturity in June. Second-half principal repayments will then come from Senegal, Ivory Coast and Gabon. Ethiopia was slated for December, but defaulted last month.\r\n\r\nIt\u2019s already been a long wait for nations that need the funding, and for high-yield investors eager for new deals. The drought in issuance began in April 2022 and lasted throughout 2023. The last time Sub-Saharan African countries spent a full year without a single international bond sale was 2009, in the midst of the global financial crisis.\r\n\r\n\u201cThere has been limited supply from higher-yielding EM countries so the demand may be robust for well-priced new issues with positive fundamentals,\u201d said Shamaila Khan, head of fixed income for emerging markets and Asia Pacific at UBS Asset Management Americas Inc. But issuance could be limited by still-elevated borrowing costs for most sovereigns in Africa, she said.\r\n\r\nOne of the main contenders to try and end the lockout is Kenya.\r\n\r\nThe spread between yields on Kenya\u2019s dollar debt and US Treasuries has narrowed by more than 400 basis points since reaching a record high last year. It closed at 599 basis points on Wednesday, according to JPMorgan Chase & Co. data, down from its high of 1,028 in April.\r\n\r\n\u201cKenya could well be the first to issue this year and one would imagine that market demand would be forthcoming,\u201d said Simon Quijano-Evans, chief economist at Gemcorp Capital Management in London. If markets perceived that a new bond issue was coming, that could also help pull down spreads from current levels as it would imply an improvement in the country\u2019s financial position for 2024, he said.\r\n\r\n\u201cCombining that with a contraction in UST yields could help pull all-in yield for a 10-year USD bond closer to the 9% mark at some stage in the first half,\u201d Quijano-Evans said. Kenya\u2019s debt due in June currently trades at a yield of 15.8%.\r\n\r\nOther contenders to end the borrowing drought include South Africa, Angola and Nigeria, according to Morgan Stanley. Each could tap the market at yields around 10%.\r\n\r\nSouth Africa specifically could issue as much as $2.5 billion in the second quarter, \u201cbut issuance of this amount will be very dependent on external financing conditions,\u201d strategists including Neville Mandimika said in a note to clients.\r\n\r\n Moody\u2019s Caution \r\n\r\nStill, Moody\u2019s Investors Service says the outlook for Sub-Saharan African sovereign issuers is negative this year. That\u2019s a reflection of risks from large debt burdens and the difficulties many countries will have refinancing at rates they can afford, analysts including John Walsh wrote in a report Wednesday.\r\n\r\nEthiopia\u2019s default on Christmas was a signal to international investors and trade partners of the heightened risk, said Robert Besseling, chief executive of Pangea-Risk, an advisory firm focusing on analysis of African economies.\r\n\r\n\u201cMany will remain locked out of international debt markets, while for many interest rates will be unaffordable,\u201d he said."

"Investors eye Ghana, other African countries’ credit comeback"

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