(Bloomberg) -- The Republic of Congo's Eurobonds rallied, driving yields down the most in almost seven years, after the central African nation made an overdue payment to bondholders to avoid its first-ever default.
Yields on the $478 million security maturing in June 2029 fell 160 basis points to 13.34 percent, the most on a closing basis since September 2009, by 2:25 p.m. in London. The move came after the Emerging Markets Traders Association said Monday it received confirmation the government had deposited the funds, which will be transferred today.
The payment, which should have been made on June 30 and led S&P Global Ratings to downgrade Congo to selective default on Aug. 2 after it missed a 30-day grace period for repayment, was at least $9.1 million in amortization, according to data compiled by Bloomberg. While the country relies on oil for the bulk of its revenue, “administrative issues sound like a more plausible factor” than a lack of cash, Standard Chartered Plc said.
“Low oil prices have certainly affected the balance sheet, as in other sub-Saharan Africa producers, but perhaps still not to the extent that the authorities would willingly stop servicing their coupons and amortization payments,” Samir Gadio, head of Africa strategy at Standard Chartered in London, said in an e-mailed response to questions. “The notes are not very liquid” and are held by a small number of investors, he said.
Fitch Ratings lowered its rating on the country to restricted default the day after S&P. Republic of Congo vies with Equatorial Guinea as sub-Saharan Africa's biggest oil producer after Angola and Nigeria. The nation of 4.5 million people pumps about 250,000 barrels a day.
The rate on the 2029 bond, based on the average life of the debt given its amortizing nature, reached a record high of 14.75 percent on Monday.
To contact the reporter on this story: Paul Wallace in Lagos at pwallace25@bloomberg.net. To contact the editors responsible for this story: Robert Brand at rbrand9@bloomberg.net, Douglas Lytle, Paul Richardson
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