[ 2015-01-28 ]

Strong demand for Tunisia’s $1bn bond
Tunisia’s transition to democratic stability was
underlined on Tuesday with the country’s first
unassisted sale of government debt since popular
uprisings sparked revolution across the Arab
world.

International investors keen to capitalise on the
country’s recent presidential elections put in
orders of more than $4bn for the $1bn bond,
allowing the country to borrow at a lower than
expected rate of 5.875 per cent over 10 years.

Last month Beji Caid Essebsi, the 88-year-old
leader of the liberal Nidaa Tounes coalition,
became the country’s first freely-elected
president after winning an election that set
Islamists against secular Tunisians.

Banks working on the bond sale say international
bond investors were reassured by the peaceful
election.

“The story of where Tunisia was and where it is
now is a compelling one to investors and a true
democratic issuer is a rare commodity in the
Middle East,” said Nicholas Samara, an
Africa-focused banker at Citigroup, which worked
on the bond sale along with JPMorgan and Natixis.

“If you compare it to Libya, Yemen and Syria —
other countries involved in the Arab Spring, you
can see why it attracted emerging market
investors. Most of the investors we met knew the
country well and they see it now as an improving
credit with the right momentum behind it.”

Although Tunisia has issued debt over the past few
years it has always come with assistance,
guaranteed by the US government, through its
Agency for International Development, or Japan.

Tunisia was once one of Africa’s most
sophisticated and prolific bond issuers, selling
bonds denominated in euros, dollars and yen, and
later this year it is expected to issue its first
Islamic government bond.

Tunisia’s finance minister Hakim Ben Hammouda,
formerly an economist at the African Development
Bank, said the sale was a signal of international
confidence in the country.

Regular, annual sales of debt are planned as a
follow up to the bond issue.

“The country faces economic and political
challenges but there have been some major
improvements and the feedback we had from
investors was that they were impressed by the
progress made in 2014 and the success of the
elections,” he said.

Substantial challenges remain in place, four years
after the country’s youthful uprising sparked
revolution in the Middle East. Unemployment
remains high, government debt has jumped to 50 per
cent of gross domestic product and growth in the
first half of 2014 was only a little over 2 per
cent. The International Monetary Fund has said
Tunisia’s economic resilience to reform will be
a key challenge for the new government and that
focus needs to be kept on banking reforms.

On the roadshow for the new bond, investors wanted
to know what impact falling oil prices might have
on the country, said Mr Ben Hammouda, and what its
commitment was to continue with economic
stabilisation.

Moody’s assigned a provisional Ba3 rating to
Tunisia, three steps below investment grade.

The yield on Tunisia’s euro-denominated bonds
due to mature in 2020 has fallen nearly 2
percentage points in the past year to 3.74 per
cent.

Source - Financial Times - UK

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