Ethiopia Eurobond Debut and Its Impact on Investors

Ethiopia's Eurobond Debut was a significant event in the country's financial history. On July 22, 2014, Ethiopia successfully issued a $1 billion Eurobond, marking its debut in the international debt market.

The Eurobond was priced at a yield of 6.5%, which was lower than expected. This was a testament to the country's strong economic growth and creditworthiness.

Investors were initially hesitant to invest in Ethiopia due to concerns over the country's economic stability. However, the successful issuance of the Eurobond helped to alleviate these concerns and attract more investors to the market.

The $1 billion raised from the Eurobond was used to finance the country's infrastructure development projects, including the construction of roads, bridges, and energy generation facilities.

Ethiopia's economy has been expanding at a remarkable 9 percent according to the IMF.

The country is now looking to tap into the international debt markets with its debut Eurobond, which is expected to raise $1 billion.

The bond has a yield of 6.75 percent and will be used to finance new infrastructure for the nation.

This is a significant move for Ethiopia, which has been experiencing rapid economic growth.

The funds will be used to address the country's foreign exchange deficit, according to Prime Minister Hailemariam Desalegn.

Ethiopia's public debt is estimated to be 44.7 percent of GDP in fiscal 2013/14, with a forecasted rise to 50.6 percent in 2014/15.

The International Monetary Fund has estimated that the risk of Ethiopia facing external and public "debt distress" remains low.

However, the IMF has noted that Ethiopia is on the "cusp of a transition to moderate" risk.

The country's economy has the fifth largest economy in sub-Saharan Africa, and in 2012/2013, it received $2 billion in Foreign Direct Investment.

Ethiopia's economy is expected to match this level of investment for the next two years.

The country's Prime Minister has stated that the government is providing loans to businesses, but has chosen to keep the 6 billion birr ($318 million) annual revenue from Ethio Telecom.

This move has been seen as a way to keep key industries, such as banking and telecommunications, out of reach of foreigners.

Consider reading: Eurobond vs Foreign Bond

International bondholders have proposed to extend the maturity of Ethiopia's $1 billion eurobond issue coming due in 2024 to 2029 or 2030.

The proposal involves an amortizing structure to avoid a big lump-sum payment at the end, with the last five years seeing repayments of $200 million a year.

The next coupon payment on the 2024 bond is due in June, with the issue trading at around 68 cents in the dollar and yielding more than 30%.

International bondholders have not formed a private creditors committee for the extension proposal because Ethiopia has continued to service the bond normally.

The proposed coupon rate for the extended eurobond is 6.625%, the same as the current one on what was originally a 10-year bond.

The Eurobond will be issued as soon as Ethiopia secures a credit rating.

The rating will provide current credit information on Ethiopia, which is expected to attract foreign investors and provide information on the country's economic stability.

The rating will be handled by an independent agency.

A good rating can attract a significant amount of funds from outside the country.

The Eurobond will be issued alongside other bonds.

Ethiopia's economy has grown by 9.7 percent in the last fiscal year.

The country received $2 billion in Foreign Direct Investment in 2012/2013 and expects to match this for the next two years.

The government is providing loans to businesses, but is keeping the 6 billion birr ($318 million) annual revenue from Ethio Telecom.