Debuts in the international bond market are always challenging. In today’s hectic bond markets, new borrowers have to fight for investors’ attention among well-known names.
Persuading an investor to do the work required to open a new credit line to lend money to a new country requires an extraordinary level of effort and organisation.
The Republic of Benin’s bond market debut was, in many respects, a model of how to manage the process. Maryse Lokossou’s efforts as technical advisor on international financing to the Ministry were instrumental in the process.
While Benin’s high ratio of government debt to GDP might have alarmed investors, its new administration was able to win their confidence thanks to its efforts at fiscal consolidation, bringing down its budget deficit and establishing a healthy trajectory of economic expansion.
The bond, which raised €500m at a yield of 6%, required a thorough and comprehensive marketing period in Frankfurt, London, New York and Boston.
A banker involved in Benin’s marketing process called the experience “unique”. “It was a true inaugural deal,” said the banker. “We had to reveal Benin to the international community. Of course there was the usual economic data, but the roadshow was also about Benin’s history and politics — its government action programme for example — not just the economy.”
The thorough approach paid off. Benin received more than €1bn of orders for its deal, and was able to reduce the yield substantially during execution.
Thanks to a disciplined approach to the pricing process, the bond performed handsomely in the secondary market, ensuring a warm reception when Benin returns for its sophomore effort.