Gabon Offers Juicier-Than-Expected Yield in Debt-for-Nature Deal

Bank of America Corp. has raised the yield on a $500 million blue bond for Gabon in an effort to drum up investor interest.

(Bloomberg) — Bank of America Corp. has raised the yield on a $500 million blue bond for Gabon in an effort to drum up investor interest.

The sale is part of a so-called debt-for-nature swap that will be used to finance a buyback of Gabon’s existing dollar-denominated bonds and help support marine conservation in the country.

The African nation and its bond arranger priced the transaction on Monday to yield 200 basis points over 10-year US Treasuries, up from initial price talk of about 180 basis points, according to people familiar with the matter. Pricing was expected as early as Aug 2. but delayed due to market volatility, as previously reported by Bloomberg.

The sinkable notes are due in 2038 and have a weighted average life of 10 years.

Bank of America is the arranger on the deal, while the Nature Conservancy — a US-based conservation nonprofit — is acting as adviser. Representatives for Bank of America and the Nature Conservancy declined to comment. A Gabon ministry official didn’t reply to a request for a comment.

Debt-for-nature swaps have been gaining traction as an alternative for emerging economies with limited access to financial markets. That’s partly because the bonds can attract international capital earmarked for environmental, social and corporate governance purposes.

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 Corp. is providing political risk insurance for the financing. A representative for the agency didn’t reply to a request for comment.

The new bonds were assigned an investment-grade score of Aa2 by Moody’s Investors Service. Gabon itself is rated deep into junk by Moody’s, at Caa1.

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