Cameroon sells inaugural Eurobond as investors shy away

Cameroon sold its debut Eurobond at the high end of its target yield as some investors stayed away because of the slump in commodity prices.

The country raised $750 million of securities due in November 2025 at 9.75 percent on Thursday. It began marketing the bond between 9.625 percent and 9.75 percent.

Cameroon followed other nations including Ghana who have sold debt at higher yields than planned to balance their budgets and finance infrastructure needs amid a drop in prices for their exports.

Even with higher yields in Africa, demand is restrained as investors become more discerning amid falling prices for commodities, which are sapping growth and revenues, according to Kevin Daly, a money manager at Aberdeen Asset Management.

“I’m not surprised to see how the new Cameroon deal has struggled, despite it coming at reasonably attractive level compared to Gabon,” Daly, who didn’t buy the debt, said by e-mail on Friday. “We are seeing deteriorating credit fundamentals across the sub-Saharan African region on back of the China slowdown, falling commodity prices, rising fiscal deficits and currency depreciation, which in turn is weighing on investor demand.”

Growth Boost

The West African nation, whose export revenue plunged with the price of oil, will use funds for its three-year emergency program to boost economic growth and finance investment projects in energy. The country’s credit is rated B, five levels below investment grade, at Standard and Poor’s.

Cameroon joined similarly rated Zambia and higher-rated Angola this year by selling bonds at rates above 9 percent. Ghana last month raised $1 billion in 15-year bonds at 10.75 percent. African nations have sold $8.25 billion in Eurobonds this year.

With $1.25 billion approved for the sale, Cameroon was sensible to cut the issue size given the weak global environment, said Mark Baker, who helps oversee $1.5 billion in emerging-market debt at Standard Life Investments Ltd. in London. He didn’t participate in the sale either. The yield on the new bond was at 9.98 percent on Friday.

Cameroon Finance Minister Alamine Ousmane Mey wasn’t available when Bloomberg News called for comment.

Pioneer Investment Management Ltd. decided to buy a small amount of Cameroon’s debt, money manager Hakan Aksoy said. It invested because it’s a benchmark Eurobond of a decent size, a "first issue and we wanted to be in this market,” he said.