ANALYSIS-Africa picks up the supply baton

Nigeria's central bank Ag. gov, Alade

After a slow start to the year, African issuers are making a beeline for the international bond markets.
First Quantum Minerals became the latest African-related issuer to execute a deal when it sold a US$850m eight-year non-call three offering on Thursday. The issue was the Zambian-focused company's second bond transaction and its first since it bought copper rival Inmet last year.
Next up could be Diamond Bank, which will hope to be luckier with a debut deal than it was last summer. The Nigerian lender, which is meeting investors, then attempted to issue subordinated debt but didn't go ahead with the deal. This time it is looking to sell senior bonds, likely to be a US$300 million five-year note.
FQM and Diamond Bank will join a slew of African issuers to have accessed the markets since April, a list that includes Zambia, Zenith Bank, Consolidated Minerals (which has half of its assets in Ghana), fertiliser company OCP, whose dual-tranche deal included a 30-year bond that was subsequently tapped, and FirstRand Bank, which made its inaugural offering in Swiss francs earlier this week.
And with Kenya, Cote d'Ivoire, Morocco and Ghana at various stages of development ahead of prospective transactions, and even Cameroon making noises about issuing a bond this year, African names should continue to pop onto screens.
"African issuers are benefiting from the same knock-on effect as the Middle East now that Russia is quiet in gaining more attention," said one debt capital markets banker. "It's a good time for African issuance."
"There's very good demand for African risk," a trader said. "I spotted Angola, Ghana and Zambia trading up. Mozambique as well. It's all generically bid."
Another banker said the growth of the African issuer base reminds him of Turkey's development a few years ago, where the country's non-sovereign borrowers gradually became more active in the international bond markets and bolder with their deals.
This is perhaps most apparent in Nigeria. "We will see more issuance from Nigeria," he said. "The GDP was [recently] rebased making it Africa's biggest economy. It's a country people are looking at and it has the breadth and scale of issuers that can access the markets in size."
However, while bankers are clearly glad to see African issuance pick up, not all deals will be straightforward. Consolidated Minerals, for example, sold its US$400m six-year non-call three offering in early May at a yield of 8.50%, 25bp wider than initial price talk, and at a significant discount to par.
The business's highly cyclical nature, the fact that the leading shareholder, Henadiy Boholyubov, is a Ukrainian national (though he's not on the US or EU sanctions list), and that Ghana's fiscal outlook is challenging, all meant the transaction was a struggle.
Others, too, may need to pay up, including the Ghanaian sovereign, which is deliberating which banks to hire after sending an RFP, and the Cote d'Ivoire, which is rumoured to have mandated banks for its first bond deal since a 2011 default caused by a post-election civil war.