Bloomberg News

Ivory Coast Eurobonds Tumble to Eight-Month Low Before Election

December 09, 2011

Dec. 9 (Bloomberg) -- Ivory Coast’s defaulted Eurobonds fell to the lowest price since March on concerns of potential unrest before voters cast ballots on Dec. 11 and weak global sentiment weighed on relatively illiquid securities.

The West African nation’s $2.3 billion of dollar- denominated bonds due 2032 dropped 1.6 percent to 46.75 cents on the dollar, the lowest since March 31, as of 12:02 p.m. in London, taking its weekly decline to 6.3 percent, according to data compiled by Bloomberg.

Voters in the world’s largest cocoa producer will cast ballots in the first legislative election in more than a decade. The poll is likely to shore up support for President Alassane Ouattara, according to the Ivorian Civil Society, as the party of former leader Laurent Gbagbo is boycotting the National Assembly election as he faces charges of crimes against humanity at the International Criminal Court. Gbagbo’s refusal to accept defeat in a November 2010 presidential vote sparked five months of violence that killed as many as 3,000.

At least three people were killed when a hand grenade exploded outside a campaign office Dec. 7 in Grand Lahou, 100 kilometers (62 miles) west of Abidjan. Three more were injured, said Jean Djaha, a candidate with the Parti Democratique de Cote d’Ivoire.

The defaulted bond is “more sensitive to the political situation in Cote d’Ivoire and the imbroglio over the authorities’ willingness to proactively service the arrears,” Samir Gadio, a London-based emerging markets strategist at Standard Bank Group Ltd., said in an e-mailed reply to questions today.

The country missed payments after elections last year as Ouattara, internationally recognized as the victor, was locked in a political standoff with Gbagbo until April. The government will resume interest payments on defaulted Eurobonds in June, Norbert Kobenan, an aide to the finance minister, said Nov. 21.

Waning demand for riskier emerging-market assets on signs of an economic slowdown in China and South Korea may be weighing on Ivory Coast’s Eurobonds, Graham Stock, chief strategist at Insparo Asset Management, said by phone from London today.

“The overwhelming cause in the weakness of the bond prices is just global sentiment, particularly weighing on relatively illiquid securities,” said Stock. “The main opposition party isn’t taking part arguably because it’s too disorganized following the defeat and arrest of Gbagbo. I would expect the elections to proceed reasonably peacefully and not lead to a major change in the balance of political power in Ivory Coast.”

The move by Gbagbo’s Front Populaire Ivorien party, which ruled for a decade, to stay away from the poll may lead to clashes in parts of the country’s south where the party derived support, according to Sebastian Spio-Garbrah, managing director of New York-based DaMina Advisors LLP.

--Editors: Ash Kumar, Peter Branton

To contact the reporter on this story: Chris Kay in Abuja at ckay5@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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