Please click the link below to read the full article by Davide Scigliuzzo
LONDON, March 1 (IFR) - Rarely can a new bond issue have evinced such extreme criticism as Tanzania's entry in the international capital markets last Tuesday. The cheaply priced US$600m seven-year private placement was described as a “disaster” by one banker.
And certainly the immediate secondary market performance looked terrible. The bonds jumped 2.75 points on their first day of trading - a 66bp compression in spread terms. That works out at a cost to the government of US$4m a year in coupon payments, assuming that the bonds could have priced at the tighter level.
For one of the poorest countries in the world, with GDP-per-capita of US$532 as of 2011, according to the World Bank, that's a considerable amount of money to be giving to investors. And the pain could get even worse.
“I still see a lot of upside,” said one investor, who reckoned the notes could quickly rally to a cash price of 107.
The deal, which was led by Standard Bank, perplexed the financial community from the moment news emerged about it nearly two weeks ago, especially as Tanzania has an unofficial mandate with Citigroup for a public Eurobond.
Although that deal remains a long way off as Tanzania does not have a credit rating, market participants were surprised the country was going ahead with a private placement as its debut international bond.
Read more: Reuters.com
LONDON, March 1 (IFR) - Rarely can a new bond issue have evinced such extreme criticism as Tanzania's entry in the international capital markets last Tuesday. The cheaply priced US$600m seven-year private placement was described as a “disaster” by one banker.
And certainly the immediate secondary market performance looked terrible. The bonds jumped 2.75 points on their first day of trading - a 66bp compression in spread terms. That works out at a cost to the government of US$4m a year in coupon payments, assuming that the bonds could have priced at the tighter level.
For one of the poorest countries in the world, with GDP-per-capita of US$532 as of 2011, according to the World Bank, that's a considerable amount of money to be giving to investors. And the pain could get even worse.
“I still see a lot of upside,” said one investor, who reckoned the notes could quickly rally to a cash price of 107.
The deal, which was led by Standard Bank, perplexed the financial community from the moment news emerged about it nearly two weeks ago, especially as Tanzania has an unofficial mandate with Citigroup for a public Eurobond.
Although that deal remains a long way off as Tanzania does not have a credit rating, market participants were surprised the country was going ahead with a private placement as its debut international bond.
Read more: Reuters.com
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