Coup: Gabon’s dollar bonds suffer biggest drop

Bisola David
Bisola David
Coup: Gabon's dollar bonds suffer biggest drop

Gabon’s military coup triggered the largest daily loss in its dollar bonds since the peak of the COVID-19 pandemic on Wednesday, just weeks after the government carried out continental Africa’s first debt-for-nature exchange.

According to Reuters, a group of top military commanders in the Central African nation stated on television in the early hours of Wednesday that they had taken over, only minutes after the state electoral authority confirmed that President Ali Bongo had won a third term.

The 2025 maturity dropped the most, by up to 14 cents on the dollar, before recovering to trade down 9.5 cents on the dollar at 83.41 cents at 1302 GMT.

The Head of Macro Strategy at FIM Partners, Charlie Robertson, stated, “That was still the biggest fall since the Covid-19 market rout in March 2020.” Both of its 2031 maturities were down roughly seven cents.

“The immediate risk for bondholders is that sanctions are imposed that complicate things, potentially making payments to and from the country difficult.”

The coup, which if successful would be the eighth in West and Central Africa since 2020, could exacerbate the continent’s already limited access to credit.

No African government had issued a new Eurobond in more than a year, despite rising interest rates and excessive debt.

“The military takeover will force investors to reassess their interest in Gabon and the wider political landscape in the region,” Senior Africa analyst at risk intelligence firm Verisk Maplecroft, Maja Bovcon, said.

Tellimer, a research organization, has warned that in response to the coup, multilateral and bilateral lenders may adjust or suspend concessional credit.

Meanwhile, shares in Gabon-based oil companies TotalEnergies Gabon and Maurel et Prom plummeted more than 20% at one point.

Gabon concluded a $436 million ‘debt for nature’ swap earlier this month, exchanging portions of its 2025 and 2031 Eurobonds for a ‘blue bond’ expiring in 2038. This bond lost 1.91 cents to 98.34 cents on the dollar.

Political risk insurance was provided by the US Development Finance Corporation for the blue bond, which was designed to raise money for marine conservation.

The insurance might cover a complete repayment in the event of default, subject to arbitration, but the exact conditions of the insurance were not disclosed at the time of the transaction.

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