New ethical bonds from Africa may face weak demand from investors after Gabon suffered a coup just following the completion of a debt-for-nature swap, according to BNP Paribas SA.
Soldiers seized power in OPEC member Gabon this week, which came two weeks after the $500 million debt swap. That was the first such deal in continental Africa, which is trying to catch up on ethical debt after having lagged a global boom in recent years.
Ethical debt has been growing in emerging markets even as new issuance of conventional bonds has stalled since the Ukraine war amid a surge in risk premiums. Yet sales of such debt from Africa have totaled just $4.2 billion this year, less than 0.5% of the global tally, according to data compiled by Bloomberg Intelligence.
It was the latest in a string of deals showing that committing to conservation goals can help governments overcome borrowing challenges. Belize, Barbados and Ecuador have struck similar transactions.In a sign of investor concern following the Gabon coup, the extra risk premium on African sovereign dollar debt has approached distressed levels at 945 basis points, the highest since mid-July.
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