Reuters

By Tosin Sulaiman
April 23, 2012

LONDON, April 23 (Reuters) – Zambia has issued requests for proposals to 11 international banks seeking to act as book runners for its debut $500 million Eurobond, a government agency official said on Monday.

Goldman Sachs, BNP Paribas, Standard Chartered and Deutsche Bank were among the banks short-listed from an initial 16 that submitted expressions of interest, an official at the Zambia Public Procurement Authority, who asked not to be named, told Reuters.

There has been strong appetite for African debt and the last such issue from the region – a debut $500 million, 10-year Eurobond from Namibia launched in October – was heavily oversubscribed with an initial coupon of 5.5 percent. It is now yielding 4.95 percent.

The limited supply from African sovereigns has ensured that debut issues are eagerly anticipated, with Nigeria’s $500 million 10-year Eurobond last year attracting heavy demand.

The tender closes on April 27 and it would take a minimum of three weeks to evaluate the bids, the official said. So far, eight banks had confirmed their participation.

“Last week, we had eight confirmations from the short-listed bidders that they will take part in the tender,” he said.

The agency has also issued requests for proposals to two law firms, Clifford Chance and White & Case, seeking a role as legal advisers, he added.

The government of Africa’s number one copper producer announced plans to issue a Eurobond in November when it unveiled its first budget after an upset election victory two months earlier.

In February, tenders were invited for two book runners to act as joint lead managers, to assist in determining the size and pricing of the issue and coordinate road shows.

The official said the size of the issue had been confirmed at $500 million.

The other short-listed banks were Citigroup, Absa Capital/Barclays Capital, UBS, HSBC, JP Morgan, Standard Bank and Credit Suisse .

Proceeds from the Eurobond are earmarked for upgrading Zambia’s dilapidated infrastructure – spending that will create jobs and go down well in rural areas where President Michael Sata is seeking to boost his support.

However, investors may be wary after rating agency Fitch said in early March that it was revising the country’s rating outlook to negative from stable, citing concerns about the direction of economic policy in the southern African state.

It said Zambia’s recent decision to reverse a privatisation deal could undermine property rights, while planned reforms of the mining and banking sectors could negatively impact investment and consequently macro-economic stability.

Alarm bells were subsequently raised by the suspension of the political party status of the main opposition party because it had not been paying its annual registration fees.

“Even if the decision is overturned by the courts, Fitch highlights again the risks associated with sending a negative message on matters relating to economic policy, property rights and respect for the rule of law,” Fitch said. (Reporting by Tosin Sulaiman, editing by Ed Stoddard, Ron Askew).