(Business in Cameroon) - Cameroon has reduced its target for the bond issue it is preparing on the Central African stock exchange BVMAC this year. According to sources close to the matter, the country reduced the target from CFAF200 billion to 100 billion. Among other reasons, the country is struggling to obtain an attractive underwriting contract from the five arrangers of the operation, namely Financia Capital and the brokerage firms Afriland Bourse & Investissement, Attijari Securities Central Africa, Société Générale Capital Securities Central Africa, and Upline Securities Central Africa.

Indeed, after tough negotiations, they offered a CFAF102 billion underwriting contract, covering just 51% of the target. When Cameroon lowered the target to CFAF150 billion, they still lowered the contract to CFAF94 billion, covering 62.6% of the new target. This underwriting level is the lowest ever offered to the Cameroonian Treasury for its public issues. During its 2022 bond issue, the target was CFAF200 billion but the country secured CFAF230 billion with the four co-arrangers guaranteeing CFAF180.5 billion even before the subscription period. The amount guaranteed was over 90% of the target, guaranteeing the success of the operation. 

Confronted with the reality of the 2023 operation, Finance Minister Louis Paul Motazé (photo) is negotiating an increase of the amount covered by the underwriting contract to 80% of the target or around CFAF120 billion. According to reliable sources, the official will meet the five arrangers once again on May 30, 2023, for a final round of negotiations.

With the negotiations getting tougher, the issuance operation initially scheduled for May, should be launched in June. This occurs in a context marked by challenging conditions on the sub-regional exchange with the introduction of high-interest rates after the central bank BEAC repeatedly raised key interest rates. 

Borrowing at variable rates

Apart from lowering its target, Cameroon has also decided to experiment with the variable-interest system. In other words, for the same security, investors will be invited to subscribe either for shorter maturities with lower interest rates or for longer maturities with much higher interest rates. This option is designed to reduce the Treasury's exposure to high market interest rates.

For the 2023 operation, Cameroon plans to raise CFAF80 billion by issuing 6-year bonds backed by a 6.75% interest rate. It also plans to raise CFAF50 billion through 4-year securities backed by a 6% interest rate and CFAF20 billion with the issuance of 8-year bonds that yield 7.25% annually. 

The figures show that Cameroon is preparing to launch its most expensive bond issue operation in almost 13 years since it began operations in the financial market.

Between 2010 and 2022, its operations on the Douala Stock Exchange (DSX) usually consisted of 5 to 7-year securities that yield between 5.5% and 6.25% interest. However, for this year’s operation, the interest rates are between 6 and 7.25%.

Brice R. Mbodiam