Tunisia's sovereign bond flies

24 May 2002

The Middle East's first truly global sovereign bond - a $650 million issue staged by Tunisia - has been very well received in international markets.

An extensive two-week roadshow that included 96 face-to-face meetings with potential investors in the US and Europe, led to the building of a commitment book exceeding $1,300 million.

'This is particularly significant because this is the first SEC [Securities & Exchange Commission] registered bond out of the Middle East,' says a banker close to the deal. 'Although Qatar, in particular, and others have staged sovereigns, they have been 144As and therefore not really global offerings. Tunisia has achieved something here.'

The original target was to raise $500 million but strong demand encouraged the Tunisians to increase the issue to $650 million. The 10-year bonds carry a coupon of 78 basis points (bp). Merrill Lynch had a sole mandate for the issue (MEED 12:4:02).

'The launch spread was 235 bp, which is pretty impressive when you think that this is a few pips lower than the South African sovereign issued at the same time and that South Africa has a much better-known credit story,' says the banker. Subscribers to the issue were split fairly evenly between the US and Europe.

By Middle Eastern standards, Tunisia is a regular issuer of sovereign bonds, having issued a string of Samurai bonds in the mid 1990s, Eur 200 million ($183 million) of paper in the summer of 1999 and two more yen-denominated bonds last year (MEED 5:4:02, Cover Story).

The success may not be Merrill Lynch's last in the region. Alongside BNP Paribas, it was awarded in late March a mandate for the forthcoming debut sovereign bond out of Morocco. Bankers close to the transaction say it will probably be brought to market in June or July unless pricing patterns move away dramatically (MEED 29:3:02).

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