Guarantees on emerging market debt need to be silver-plated these days after the defaults of Ukraine’s state energy firm Naftogaz and Kazakhstan’s BTA bank in recent years show implied guarantees are not worth the paper that they weren’t even written on.
Tunisia must have taken that to heart as it issued a dollar bond this month guaranteed by the United States, still rated AAA by two major ratings agencies.
Tunisia was planning to launch a Eurobond before the Arab Spring uprisings last year, but the bond was shelved and investors remain cautious about the country’s economic outlook. The country’s central bank governor was sacked a few weeks ago and its finance minister quit last week.
The U.S.-guaranteed bond had a coupon of 1.686 percent, compared with yields on Tunisian debt of around 6 percent, and was the lowest coupon on any bond issued by the country, according to Natixis, one of the lead managers of the bond.
The $485 million bond was oversubscribed and attracted investors from outside the usual emerging market universe, according to Nabil Menai, global head of emerging market debt origination at Natixis:
