The Central Bank of Tunisia on Wednesday sold a bond to the notoriously risk-averse Samurai investor base despite widespread fears for the political and economic future of the North African state.
Tunisia priced a ¥22.4bn 10-year deal, 95% guaranteed by the Japan Bank for International Cooperation, at yen offer-side swaps plus 100bp. Daiwa and Mitsubishi Morgan Stanley UFJ handled the business.
Tunisia revised the initial swaps plus 90bp–100bp guidance range to plus 100bp on Monday, although a tight end print always seemed unlikely given the buyside target was for a 2% handle, according to a banker familiar with the deal. The final spread translated into a 2.04% coupon.
The private placement paper was distributed to central investors comprising specialised banks and life insurance companies, and to regional investors, including shinkin and other cooperatives. This was in contrast to Tunisia’s last Samurai in December where the ¥25bn 10-year was 50% anchored by two key accounts, without which a trade of that size wouldn’t have crossed the line. Those two accounts did not book the new deal, having filled credit line constraints, which is something of a kudos point for the leads.
Tunisia is seen as the country most likely to emerge from the Arab Spring uprisings with a functioning democracy, following a revolution in 2011 which is widely credited with inspiring subsequent uprisings in Egypt, Libya and Syria.
“While I’m sure investors in the Tunisia deal look upon it as an opportunity to book cheap JBIC risk, the standalone element is still a consideration given the country’s unstable backdrop. There’s still 5% of what appears to be high political risk to factor into your credit evaluation,” said a Tokyo-based syndicate head away from the deal.
Tunisia is rated Ba2/BB–/BB+, making it one of the lowest-rated issuers to ever print a Samurai with backing by JBIC. The first three coupons on the deal are not JBIC guaranteed, which is the norm for such deals, but which might have been a material risk consideration in this case.