Gabon dollar-denominated bonds slide after army says it seized power


  • 2025 maturity falls as much as 14 cents
  • Investors watching risk of sanctions
  • ‘Too early’ to gauge impact on wider Africa debt
  • ‘Debt for nature’ swap in focus

LONDON/JOHANNESBURG, Aug 30 (Reuters) – Gabon’s military coup sparked the steepest daily drop in its dollar bonds since the height of the COVID-19 pandemic on Wednesday, just weeks after the country carried out continental Africa’s first debt for nature swap.

A group of senior military officers in the Central African nation announced on TV in the early hours of Wednesday that they had taken control, minutes after the state election body announced that President Ali Bongo had won a third term.

The 2025 maturity fell the most, by as much as 14 cents, before recovering to trade down 9.5 cents on the dollar at 83.41 cents at 1302 GMT.

Reuters Graphics

That was still the biggest fall since the COVID-19 market rout of March 2020. Its two 2031 maturities were both down around 7 cents.

“The immediate risk to bondholders is that sanctions are imposed that complicate things”, potentially making payments to and from the country difficult, said Charlie Robertson, head of macro strategy at FIM Partners.

The coup, which if successful would be the eighth in West and Central Africa since 2020, could exacerbate already poor access to finance for countries on the continent.

Amid rising interest rates and high debt, no African country has issued a new eurobond in more than a year.

Reuters Graphics

“The military takeover will force investors to reassess their interest in Gabon and the wider political landscape in the region,” said Maja Bovcon, senior Africa analyst at risk intelligence company Verisk Maplecroft.

Tellimer, a research firm, also warned that multilateral and bilateral lenders could change or suspend concessional lending in response to the coup. Meanwhile, shares in Gabon-exposed oil producers TotalEnergies Gabon (EGAB.PA) and Maurel et Prom

DEBT FOR NATURE

Gabon completed a $436 million “debt for nature” swap earlier this month, where it exchanged parts of the 2025 and 2031 Eurobonds for a “blue bond” maturing in 2038. That bond fell 1.91 cents on the dollar to 98.34 cents.

The blue bond, which was meant to generate savings for marine conservation, has political risk insurance from the U.S. Development Finance Corporation.

The insurance could cover a full repayment in the event of default, subject to an arbitration, but the precise terms of the insurance were not made public at the time of the deal.

The next Eurobond coupon payment is not due until November 24 this year so the immediate risk for bondholders is low, Andrew Stanners, investment director at asset manager abrdn, told Reuters.

Any impact on the rest of the continent would depend on “whether we get into a sanctioned or willingness to pay situation,” he said.

Other investors doubted an immediate impact on other international bond issuers in Sub-Saharan Africa.

“This shouldn’t impact the prospect of other countries returning to the market as there wasn’t really any prospect anyway,” said Nick Eisinger, an emerging markets fixed income fund manager at Vanguard.

Reporting by Libby George and Rachel Savage; additional reporting by Marc Jones Editing by Amanda Cooper and Conor Humphries

Our Standards: The Thomson Reuters Trust Principles.

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Rachel Savage is Africa Senior Markets Correspondent at Reuters, where she covers finance and economics across Sub-Saharan Africa, from sovereign debt crises and IMF programs to foreign exchange markets and cryptocurrencies. Previously she was LGBT+ Correspondent at the Thomson Reuters Foundation for just over three years and was awarded Journalist of the Year in 2021 by the NLJGA: The Association of LGBTQ Journalists, a U.S. group. Before that, Rachel was based in Nairobi and then Lagos as an East and West Africa Correspondent for The Economist, after starting her career a decade ago as a business journalist in London.



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2023-08-30 20:58:39

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