Angola expands funding sources by issuing bonds backed by Chinese bank ICBC

9 November 2015

Angola has successfully completed an issue of Eurobonds, an operation supported by a group of international banks which includes the Industrial and Commercial Bank of China, expanding its sources of funding in troubled times.

The Ministry of Finance last week announced the completion of an issue of Eurobonds in the amount of US$1.5 billion, getting closer, according to a survey by Eaglestone Securities, to the target of an additional US$10 billion in credit, set by the government to address the financing needs brought about by the drop in oil prices.

“As mentioned by the Angolan authorities, this issue will enable the country to become less dependent on traditional sources of credit,” said Eaglestone in a statement after the results announcement.

The consultancy said demand for the issue was “very significant”, which could “lead the Angolan authorities to consider issuing more Eurobonds in the future.”

The placement of the issue, as with other African oil producing countries, demonstrates that even with the financial difficulties experienced by these countries, investor interest “remains intact.”

The bond issue had been under consideration since 2011 and, according to the international financial agencies, was planned for the last few months, but was eventually postponed, pending improved market conditions.

This was the second time Angola successfully approached international debt markets after in 2012 it issued debt instruments similar to Eurobonds in the amount of US$1 billion.

The cash raised from the new operation, as well as bilateral loans and available credit lines, is intended for infrastructure projects considered priorities for the 2016-17 period in the areas of education, health, water and roads.

Of about US$9.5 billion raised in recent months, the largest share – US$6 billion – comes from China, followed by the World Bank, BBVA, Société Générale, Goldman Sachs and Gemcorp.

Eaglestone Securities said the additional credit now obtained is expected to raise Angolan public debt levels by almost 15 percentage points to 57 percent of GDP in 2015.

The goals set by the Angolan Ministry of Finance for the Eurobond issue were to diversify sources of external funding, establish long-term sources of funding with international investors, improve the assessment of credit rating agencies, consolidating a history of investor yields and possibly increase the amount of foreign currency reserves.

The operation had the legal and technical support of Goldman Sachs, JP Morgan, the World Bank and IMF and the President of Angola mandated as representatives of the Angolan State, Deutsche Bank and the Industrial and Commercial Bank of China (ICBC), in addition to investment bank Goldman Sachs.

Eurobonds are debt securities denominated in a currency other than that of the issuing country, usually focused on investors in more than one country and traded in various financial markets. (macauhub/AO/CN)