This afternoon (5 Jan) the yield on the Cote d’Ivoire US dollar-denominated sovereign bonds climbed back up 60 basis points to 15.68% as of 3:49 p.m. in Abidjan, according to a report on Bloomberg, after reaching 16.19% on 4 January. The price fell 4.1% to 40.76 cents on the dollar from a close of 42.5 cents yesterday (falls in bond prices area linked to rising yields), as news came that there is no let-up in the political crisis.
Yields had fallen earlier after an African Union envoy claimed the former president Laurent Gbagbo had honoured his pledge to lift a blockade on the hotel where the country’s president-in-waiting Alessane Ouattara is protected by United Nations troops. Prices fell this afternoon as it became clear it had not been lifted.
The country, now in danger of renewed civil war, has $2.3 billion of 2.5% Eurobonds due in 2032. It missed a payment of coupon interest totalling $29 million to bondholders on 31 December. The Gbagbo regime also failed to pay public-sector employees in December and it is likely these would be paid before bondholders. The CFA-zone central bank has withdrawn signatory powers after international and regional opinion that Gbabgo had lost an election last year but he refused to relinquish power.
Another report on Bloomberg quotes Thierry Desjardins, vice president in charge of sovereign debt restructuring at BNP Paribas SA, as saying there is a 30-day grace period to make the payment on the bond and no action can be taken by creditors until 31 Jan.
The bonds had been created in the enthusiasm for high-yielding frontier market debt, after Cote d’Ivoire defaulted in 2000 on $1.24 bn of Brady bonds and $1.03 bn of debt denominated in French francs and the yield climbed as high as 49%, according to Bloomberg data.
The news agency quotes David Damiba, London managing director for Renaissance Asset Managers (of Moscow-based Renaissance Group), who does not hold the bonds, as saying that a yield above 20% “is probably where you can start seeing some specialist buyers come in potentially to look at opportunities. 15%, considering what’s going on down there, is actually not pricing risk in my view. Should the situation move a little bit I could participate.”