Kenya could become the first African country to tap global debt markets this year as it begins a bond roadshow this week, but Eurobond financing is likely to remain out of reach for most of its peers on the continent.
Bond sales from sub-Saharan Africa, which had previously been booming, are yet to start in 2016 after a stormy start to the year for commodities and currencies that has left some countries on the brink of crisis.
Despite the difficulties, some African Eurobonds have been outperforming, thanks in part to the bounce in oil and metals but also on the back of some potential turnaround stories, something all investors love.
Back in January investors were demanding record premiums of 620 basis points to hold African bonds rather than US debt. That has now fallen back to 550 bps, with oil importers Kenya and Cote d'Ivoire topping the list of winners as this chart shows.
An investor-friendly debt swap by Mozambique's state-run fishing firm has also helped sentiment, as has struggling metal miner Zambia starting talks with the International Monetary Fund.
Now some countries could leverage the improved mood. Kenya's presentation, led by Finance Minister Henry Rotich, is billed as a 'non-deal' roadshow but it is likely to be at least a test of the waters.
"(Kenya) could probably issue. Aside from the eight per cent budget deficit, it's a pretty good story," said Kevin Daly, a portfolio manager at Aberdeen Asset Management. "The currency is stable, domestic rates are coming down, inflation is starting to fall and growth is in the 5-6 per cent range."
The World Bank this year singled out Kenya as an African bright spot, with economic growth accelerating thanks to cheaper oil, a solid agriculture sector, and infrastructure investment.
The yield on its existing 2024 dollar bond is down to around 7.75 per cent from it 9.8 per cent January high. But to warrant the extra cash, any new 10-year bond will need to have a premium of up to 50 basis points on that, investors say.
But other African countries will have to pay much more.
Desperate for cash
Countries such as Ghana, which is also holding a roadshow next week, could find itself having to pay double-digit percentage coupons.
Once considered a rising star on the continent, the commodity-reliant west African nation is dogged by inflation of almost 20 per cent, slowing growth and public debt of 80 per cent of GDP.
Desperate for cash, it paid 10.75 per cent last October to raise $1 billion. That bond even came with a partial World Bank guarantee. It is now at just over 11 per cent.
The government has got its eyes on another $1 billion bond this year, but investors are likely to want another World Bank guarantee at the very least.
"At 12 per cent, Ghana should not be coming to market, they should be doing more to convince people they are serious about reform," Exotix head of research Stuart Culverhouse said.
Such yields can easily deter countries - Cote d'Ivoire has said it will not sell Eurobonds this year - and Aberdeen's Daly predicts sub-Saharan African issuance could effectively halve to $3.0 billion-$4.0 billion this year.
Angola, which has turned to the World Bank for assistance, and Nigeria could also try their luck. The latter has budgeted for a $1 billion Eurobond.
But the oil collapse had left these countries with big budget deficits and economies growing at less than 3 per cent. Their currencies are also seen as overvalued, with black market rates significantly weaker than official exchange rates.
Nigeria especially has steadfastly refused to devalue and Reuters reported it recently dropped bond roadshow plans and would turn instead to China for cash.