Crisis in Gabon Leads to Steepest Decline in Dollar-Denominated Bonds


Gabon’s military coup triggered the most significant daily decline in its dollar bonds since the peak of the COVID-19 pandemic on Wednesday.

This happened just a few weeks after the nation successfully executed Africa’s inaugural debt-for-nature exchange.

In the early hours of Wednesday, a group of senior military officials in Gabon declared on television that they had assumed control.

This announcement came shortly after the state election commission declared President Ali Bongo as the victor of a third term, as reported by Reuters.

Charlie Robertson, the Head of Macro Strategy at FIM Partners, noted that this drop marked the most substantial fall since the market turmoil of March 2020 caused by the pandemic.

Both 2031 maturities experienced declines of around seven cents.

The primary concern for bondholders currently is the potential imposition of sanctions that could complicate financial transactions involving the country.

This coup, if successful, would be the eighth instance of a military takeover in West and Central Africa since 2020, potentially worsening the already limited access to financial resources for nations on the continent.

With increasing interest rates and significant debt burdens, no African country had introduced a new Eurobond for over a year.

Maja Bovcon, Senior Africa analyst at Verisk Maplecroft, stated that the military intervention would necessitate investors to reevaluate their investment interests in Gabon and the broader political scenario in the region.

Research firm Tellimer cautioned that multilateral and bilateral lenders might modify or suspend concessional lending in response to the coup.

Simultaneously, shares in Gabon-linked oil producers TotalEnergies Gabon and Maurel et Prom plummeted by more than 20 percent at one point.

Recently in August, Gabon concluded a $436 million ‘debt for nature’ swap, converting portions of the 2025 and 2031 Eurobonds into a ‘blue bond’ that matures in 2038.

This blue bond, intended to generate funds for marine conservation, experienced a decline of 1.91 cents to reach 98.34 cents on the dollar.

The US Development Finance Corporation provided political risk insurance for this bond, which could potentially cover full repayment in case of default, subject to arbitration.

However, the specific terms of the insurance were not disclosed during the deal’s execution.


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