Bloomberg News

Ivory Coast Resumes Payments on Its Defaulted Eurobonds

June 15, 2012

Ivory Coast, the world’s largest cocoa producer, said it has resumed coupon payments on $2.3 billion of defaulted Eurobonds for the first time since January last year.

The country told the Central Bank of West African States, which represents Ivory Coast and a number of other former French colonies, to transfer $45 million to meet scheduled June coupon payments on June 12, Adama Kone, head of the nation’s public treasury said by phone yesterday. The dollar bonds gained for a second day, jumping 1.6 percent to 72.375 cents on the dollar as of 11:23 a.m. in London, according to data compiled by Bloomberg.

The Eurobonds due 2032 have surged 50 percent this year after the government of President Alassane Ouattara pledged to bondholders in January that the June payment would be made. The government of ousted President Laurent Gbagbo halted payments following a post-election crisis in November 2010.

“This is certainly a significant step forward that will help reintegrate Cote d’Ivoire into the global financial system after last year’s default,” Samir Gadio, an emerging-markets strategist at Standard Bank Group Ltd. in London, said by e- mail. He forecasts the price of the bonds will reach “at least 90 on a multi-month basis.”

Ivory Coast will meet the holders of its defaulted Eurobonds early next month to talk about the payment of the three coupons the country missed in 2010 and 2011, Kone said. The payment of the missed coupons will start in 2013, he said.

Good Faith

“I am pleased to confirm to you that the Republic of Cote d’Ivoire has instructed Citibank as Trustee Paying Agent to pay the holders of the bonds,” Finance Minister Charles Koffi Diby, said in an e-mailed statement sent today by Lazard & Co., which advises Ivory Coast. The semiannual coupon of $43.7 million payment will be made on July 2 and a good faith payment of $2.1 million made on June 29, Diby wrote.

At least 3,000 people died in post-election violence after Gbagbo refused to hand over power to Ouattara, who won a November 2010 vote. Exports of cocoa and coffee were slashed during the crisis, starving the government of revenue. Ouattara took power last May.

The bonds were initially sold in April 2010. Last year’s default was the second for Ivory Coast since 2000 when it reneged on $3.5 billion of Brady bonds, securities created as part of a debt restructuring plan for developing countries and named after former U.S. Treasury Secretary Nicholas Brady.

Subdued Advances

Ivory Coast dollar bonds have returned 44 percent so far this year, the best performer and beating an average return of 6.5 percent, according to the JPMorgan Chase & Co. EMBI Global Index. Venezuela had the second-highest gain with a 15 percent.

Further advances for the debt this year may be subdued on concerns over concerns about the European debt crisis, said Kojo Amoo-Gottfried, an analyst at FM Capital Partners Ltd.

“They’ve dealt with many of the internal issues, excluding arrears, but market sentiment isn’t very positive right now for bonds in general for emerging markets and that may extend some pressure on them until the euro zone issue is resolved,” Amoo- Gottfried said in a phone interview from London today.

The West African nation’s economy is expected to expand by about 8 percent this year, after contracting 4.7 percent in 2011, according to the International Monetary Fund. Ivory Coast will get $5 billion in debt relief when it completes the country’s program for indebted poor nations, expected this month, the Washington-based lender said in May.

Challenges

The country may sell debt abroad within the next two years to help fund investment in development, Aurelien Mali, a sovereign credit analyst at Moody’s Investors Service, said in a May 16 interview in Johannesburg.

The economy has “definitely improved significantly over the last six months,” Amoo-Gottfried said. “It still has a lot of challenges, such as the violence in the west of the country and cocoa prices remain lower than they were in 2011.”

A June 8 ambush that killed seven United Nations peace- keepers was was deadliest attack on foreign troops in Ivory Coast in eight years. Four more residents died in attacks in the same cocoa-growing area along its porous western border with Liberia overnight on June 12 and as many as 5,000 people have fled their homes, according to the UN.

The attacks are extending a decade of violence which started with a military uprising in 2002 that left Ivory Coast divided between a government-controlled south and rebel-held north.

Cocoa prices have fallen more than 30 percent in London from their 2011 peak.

To contact the reporters on this story: Olivier Monnier in Abidjan at omonnier@bloomberg.net; Chris Kay in Abuja at ckay5@bloomberg.net

To contact the editors responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net; Gavin Serkin at gserkin@bloomberg.net


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