BofA-Led Gabon Blue Bond Sale Faces Delays on Market Volatility

The Bank of America-led planned sale of about $500 million of blue bonds to finance a buyback of Gabon’s existing dollar-denominated bonds will be pushed back until at least Monday, according to people familiar with the matter.

(Bloomberg) — The Bank of America-led planned sale of about $500 million of blue bonds to finance a buyback of Gabon’s existing dollar-denominated bonds will be pushed back until at least Monday, according to people familiar with the matter.

The African country and its bond arranger are delaying the pricing of the new bonds citing high market volatility, said the people who asked not to be named as they are not authorized to speak publicly on the matter. The notes, which are being sold by the Gabon Blue Bond Trust, were expected to price as early as Wednesday this week, they said.

On Wednesday, bankers assessed investors demand for the transaction at a yield of about 180 basis points over 10-year US Treasuries, according to those familiar with the matter. Benchmark Treasury yields have jumped over 15 basis points since settlement levels on Tuesday, when the US was stripped of its top-tier sovereign credit rating by Fitch Ratings, curtailing the potential cost savings from the debt swap for Gabon.

Bank of America is the arranger of the transaction, while the Nature Conservancy is acting as adviser. 

A Gabon ministry official said the offering was being postponed “due to market conditions” and declined to give a new date, noting the government was “keeping an eye on the markets.” A representative for the Nature Conservancy and Bank of America declined to comment.

Debt-for-nature swaps have been gaining traction as an alternative for emerging economies with limited access to financial markets, in part because the bonds can attract international capital earmarked for ESG. 

Earlier this year, Ecuador completed the world’s largest debt-for-nature deal, a transaction that allowed the nation to exchange $1.6 billion of dollar-denominated bonds for a new $656 million loan tied to protecting habitats of the Galapagos Islands.

The US International Development Finance Corp. is providing political risk insurance to the financing. The agency didn’t reply to a request for comment.

The new bonds were assigned an investment-grade score of Aa2 by Moody’s Investors Service. Gabon itself is rated deep into junk by Moody’s, at Caa1.

–With assistance from Katarina Hoije.

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