Benin, a small West African nation, has made history by issuing its first-ever dollar-denominated bond, raising $750 million from international investors. The bond, which has a 14-year final maturity and an amortizing structure, was met with strong demand and oversubscribed by more than four times, according to sources close to the deal.
The bond sale, led by Finance Minister Romuald Wadagni, is part of Benin’s ambitious development plan, which aims to boost economic growth, reduce poverty, and improve public services. Benin, which uses the West African CFA franc that is pegged to the euro, has previously only issued bonds in the euro currency.
The dollar bond issuance follows a successful euro bond sale in 2021, when Benin raised 1 billion euros ($1.1 billion) with two tranches of 11-year and 31-year maturities. The proceeds of that bond were used to finance projects in health, education, agriculture, and infrastructure sectors, as well as to refinance some of its existing debt.
Benin’s 2035 euro bond, which has a coupon of 4.95%, currently yields around 8%, according to LSEG data. The yield on the new dollar bond was not disclosed, but sources said it was lower than the euro bond, reflecting the favorable market conditions and the strong credit profile of Benin.
Benin is rated B+ by Fitch and S&P, and B1 by Moody’s, with stable outlooks from all three agencies. The ratings reflect Benin’s prudent fiscal management, low debt burden, diversified economy, and political stability. Benin has also been praised for its effective response to the coronavirus pandemic, which has kept the infection and death rates low and allowed the economy to recover quickly.
Benin is not the only African country to tap the international bond market this year. In January, Ivory Coast, another West African CFA franc user, raised $2.6 billion with a dual-tranche sustainable bond, the first of its kind from the continent. The bond, which has maturities of 12 and 30 years, was also oversubscribed and attracted investors seeking environmental, social, and governance (ESG) opportunities.
The success of these bond sales shows that there is still strong appetite for African debt, despite the challenges posed by the pandemic, the geopolitical tensions, and the rising global interest rates. Investors are looking for higher yields and diversification in emerging and frontier markets, and are willing to support countries that have sound economic policies and growth prospects.
Benin and Ivory Coast are expected to be followed by other African issuers, such as Ghana, Kenya, Nigeria, and Senegal, who are planning to raise funds from the bond market this year. These countries hope to take advantage of the favorable market window and secure financing for their development needs.
The bookrunners for Benin’s dollar bond were Citi, JPMorgan, and Societe Generale. Benin’s finance ministry did not respond to requests for comment.
Source: Reuters
