Johannesburg — Gabon moved forward with Africa’s first debt-for-nature swap on Tuesday in a deal that saw the country buy back a nominal $500 million of its international debt and price an equal size eco-friendly blue amortizing bond that will mature in 2038.
Buying bonds back at a discount, Gabon accepted a total of $436 million, close to its maximum of $450 million, with investors offering up more than $1.1 billion, according to a notice published on the London Stock Exchange.
The new $500 million 15-year ‘blue bond’ was priced on Monday with an interest rate of 6.097% – a spread of 200 basis points above U.S. Treasuries, two sources with knowledge of the deal told Reuters.
That is cheaper than the bonds being partially bought back, which pay coupons of between 6.625% and 7%.
“The low yield reflects credit enhancements,” said Jamie Fallon at Tellimer.
At their simplest, debt-for-nature swaps see a country’s debt bought up by a bank or specialist investor and replaced with cheaper debt, usually with the help of a multilateral development bank “credit guarantee” or “risk insurance”. The savings are intended to be used to fund conservation.
In the case of Gabon, the U.S. International Development Finance Corporation (DFC) is providing political risk insurance for the new issue. The DFC, which provided a similar insurance for recent deals in Ecuador and Belize, did not reply to a request for comment.
Gabon’s beaches and coastal waters host the world’s largest population of leatherback turtles, with estimates putting it at nearly a third of the global population of the endangered species.
Gabon’s 2025 Eurobond is being bought back at 96.75 cents on the dollar, and the February and November 2031 maturities at 85 cents, the London Stock Exchange notice said. The bonds are currently trading some 2.5 cents below that. , ,
A Gabon government spokesperson could not immediately be reached to comment. Bank of America, which arranged the deal, and The Nature Conservancy, which advised on it, declined to comment.
*Rachel Savage, Marc Jones, Editing: Karin Strohecker & Mark Potter – Reuters