The Democratic Republic of Congo has made its first entry into the international bond market, raising $1.25 billion as investors placed more than $5 billion in orders for the debut issue.
The transaction was larger than the government’s initial $750 million target and was split between two bonds. A $600 million note due in 2032 was priced at a yield of 8.75%, while a $650 million bond maturing in 2037 carried a 9.5% yield.
Strong demand allowed the government to secure better terms than initially indicated. The order books exceeded $2 billion for the shorter-dated bond and $2.8 billion for the longer one, according to Daba Finance.
For Kinshasa, the transaction is about more than raising money. Finance Minister Doudou Fwamba Likunde has said the government wants to establish a presence in international capital markets and eventually become a regular sovereign issuer. The aim is also to diversify the sources available to finance the country’s development.
The proceeds are earmarked for priority projects in infrastructure, energy and social development. Plans include roads, power infrastructure and upgrades to Kinshasa’s N'djili airport, according to the government.
Investor interest comes against a backdrop of strong demand for the minerals that underpin much of Congo’s economy. The country is one of the world’s largest producers of cobalt and a major source of copper, both of which have become increasingly important to global energy and technology supply chains.
Relatively low public debt has also helped make the first issue more attractive. Independent estimates put public debt at around 18.5% of GDP before the bond sale.
The new borrowing, however, comes at a significantly higher cost than the concessional financing on which DRC has traditionally relied. The new bonds carry yields of 8.75% and 9.5%, compared with much cheaper funding from development institutions and other official lenders.
That difference will matter as the government considers further borrowing. The finance ministry has indicated that the debut issue is part of a broader $1.5 billion Eurobond program.
For now, the successful sale gives DRC access to a pool of international investors it had not previously tapped. It also provides a market-based test of how investors view the country’s economic prospects at a time when strong copper and cobalt demand is supporting growth, even as conflict continues in the east.
The first Eurobond does not remove the financial risks facing DRC, but it gives Kinshasa another way to fund infrastructure and other long-term projects — at a considerably higher price than the concessional loans on which it has traditionally relied.
The Democratic Republic of Congo has made its first entry into the international bond market, raising $1.25 billion as investors placed more than $5 billion in orders for the debut issue. The transaction was larger than the government’s initial $750 million target and was split between two bonds. A $600 million note due in 2032 was priced at a yield of 8.75%, while a $650 million bond maturing in 2037 carried a 9.5% yield.
Strong demand allowed the government to secure better terms than initially indicated. The order books exceeded $2 billion for the shorter-dated bond and $2.8 billion for the longer one, according to Daba Finance.
For Kinshasa, the transaction is about more than raising money. Finance Minister Doudou Fwamba Likunde has said the government wants to establish a presence in international capital markets and eventually become a regular sovereign issuer. The aim is also to diversify the sources available to finance the country’s development.
The proceeds are earmarked for priority projects in infrastructure, energy and social development. Plans include roads, power infrastructure and upgrades to Kinshasa’s N'djili airport, according to the government.
Investor interest comes against a backdrop of strong demand for the minerals that underpin much of Congo’s economy. The country is one of the world’s largest producers of cobalt and a major source of copper, both of which have become increasingly important to global energy and technology supply chains.
Relatively low public debt has also helped make the first issue more attractive. Independent estimates put public debt at around 18.5% of GDP before the bond sale.
The new borrowing, however, comes at a significantly higher cost than the concessional financing on which DRC has traditionally relied. The new bonds carry yields of 8.75% and 9.5%, compared with much cheaper funding from development institutions and other official lenders.
That difference will matter as the government considers further borrowing. The finance ministry has indicated that the debut issue is part of a broader $1.5 billion Eurobond program.
For now, the successful sale gives DRC access to a pool of international investors it had not previously tapped. It also provides a market-based test of how investors view the country’s economic prospects at a time when strong copper and cobalt demand is supporting growth, even as conflict continues in the east.
The first Eurobond does not remove the financial risks facing DRC, but it gives Kinshasa another way to fund infrastructure and other long-term projects — at a considerably higher price than the concessional loans on which it has traditionally relied.
