The new bond will be the first Tunisian dollar-denominated sovereign issue since 1997 when Merrill Lynch was sole arranger of the country’s $400 million debut Yankee bond (MEED 29:8:97). The upcoming issue is expected to have a benchmark size of at least $500 million and a maturity of 10 years.

‘The next step will be to go ahead with roadshows in the US and Europe,’ says a banker close to the deal. Demand for the bond should be high given the strong international appetite for emerging market sovereign debt, and investors’ attempts to diversify into markets less risky than Latin America and offering better returns than Eastern Europe (MEED 5:4:01, Cover Story).

Tunisia has been a frequent issuer of sovereign bonds since 1994, though until now it has preferred the Japanese market. The last two issues, both lead arranged by Merrill Lynch in 2001, comprised a five-year Global Samurai bond worth Y35,000 million ($293 million), carrying a coupon rate of 2.27 per cent over Libor, and a 30-year Global Yen bond for Y20,000 million ($167 million) with a 4.2 per cent coupon (MEED 23:03:01).

International bankers say the government’s decision to launch a dollar-denominated issue reflects its desire to diversify the country’s portfolio.