Gabon’s debt-for-nature swap is edging closer to reality as the African nation tests international markets with a $500 million bond deal.
The notes, which are being sold by the Gabon Blue Bond Trust and marketed by Bank of America, are expected to price as soon as Wednesday, according to people familiar with the matter, who asked not to be named because the matter is private.
The new debt will be used to help fund a buyback of existing sovereign debt and finance environmental protection efforts.
From the article:
Pricing discussions for the notes included an interest rate of about 180 basis points over 10-year Treasuries, according to the people.
Debt-for-nature swaps have been gaining traction as an alternative for emerging economies with limited access to financial markets, in part because the bonds can attract international capital earmarked for ESG.
Earlier this year, Ecuador completed the world’s largest debt-for-nature deal, a transaction that allowed the nation to exchange $1.6 billion of dollar denominated bonds for a new $656 million loan tied to protecting habitats of the Galapagos Islands.
The US International Development Finance Corporation is providing political risk insurance to the financing. The new bonds were assigned an investment-grade score of Aa2 by Moody’s Investors Service. Gabon itself is rated deep in junk by Moody’s, at Caa1.
Bank of America is the arranger of the transaction, while the Nature Conservancy is acting as adviser.
Representative for Gabon, the Nature Conservancy and DFC didn’t reply to requests for comment. A spokesperson for Bank of America declined to comment.
Imperialist debt traps march onwards. Can’t pay for the old debt trap? Here’s a new one, to help pay for the old one.
Very true. I wonder if there’s any way of preventing debt from ending up in the hands of vulture funds?
There are a few options. Debt should be regularly forgiven, as was done throughout the history of civilization until very recently. Debt on a sovereign level should only be taken in that country’s own currency, so they aren’t forced to sell their goods internationally at cut rate prices to get the foreign currency required to repay the debt. The imperialist Bretton Woods financial institutions must be dissolved, as their policies and iron fists are the drivers of this unproductive and exploitative debt.
Some of these things are becoming options with the BRICS financial institutions, debt policies, and development policies, but none of these things will fully happen at a global level until capitalists are removed from power and regions can develop in the way their people so desire.
