Rebel advances in CI boost Eurobond prices

Rebel advances in Cote d’Ivoire are boosting the price of the country’s €2.3 bn Eurobond, which are in default since 1 Feb, in London trading. According to Bloomberg today (30 Mar), the advance boosted the dollar-denominated bonds to their highest in at least 2 months on 29 March as they climbed 4.2% so their price was 39.875 % of face value last night. The yield fell 31 basis points to 8.6%, according to data compiled by Bloomberg.
The country seems to be moving back in civil war, and the Republican Forces, loyal to presidential contender Alessane Ouattara, have taken at least 5 towns this week and moved to within 240 kilometres of Abidjan. The RF stepped up their military campaign in the past month, mainly in the western cocoa- producing region, taking the towns of Duekoue, Guiglo and Daloa in the past few days, and the eastern town of Abengourou on 29 March.
Reuters reports that heavy fighting has flared in the northern Abidjan suburb of Abobo, under control of the Republican Forces. Forces loyal to Gbagbo were accused of shooting civilians again yesterday, adding to a toll in which 460 people are already reported to have been killed. Up to 1 million Ivorians have now fled fighting in Abidjan alone, according to the U.N. refugee agency and more across the country. At least 112,000 have crossed into Liberia to the west.
The problem stems from a stand-off after incumbent president Laurent Gbagbo refused to leave after a Constitutional Court ruling disallowed hundreds of thousands of votes, meanwhile using the military to blockade Ouattara in a hotel where he is protected by UN peacekeepers. Although ECOWAS and the African Union promised strong measures in December and January, they have been unable to muster support for a military intervention to remove Gbagbo and recently the RF started its advance. Last week there were renewed international calls for intervention, wondering what the difference is between Libya and Cote d’Ivoire. The previous civil war was brutal and yesterday Amnesty International already said “All parties to the conflict have committed serious human rights violations including unlawful killings and rape and sexual violence against women.”
Observers seem to hope that the Republican Forces can drive out Gbagbo in a quick campaign and this is the reason for the rising bond prices. The Eurobond was created after Cote d’Ivoire reneged on $3.5bn of “Brady bonds” in 2000. These were fixed-income securities created as part of a debt restructuring plan for developing countries and named after former U.S. Treasury Secretary Nicholas Brady. It issued Eurobonds in April 2010 as part of its debt restructuring at a yield of 10.181%. The default was declared after a 30-day grace period after the country was unable to pay a $29m coupon interest payment due on 31 December.
Cote d’Ivoire’s financial sector had been in chaos since January. The region’s central bank, BCEAO, shut its offices on 27 January in the commercial capital, Abidjan, after finance ministers of the West African Economic and Monetary Union (WAEMU) ordered it not to give Gbagbo access to national funds. Cocoa exports were also halted. Gbagbo ordered the nationalization of foreign banks which had closed during February.


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