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So long, and thanks for all the tuna bonds

Summary:
When Zambia issued its first international bond, in 2012, investors could knock themselves out reading a 106-page prospectus of disclosure regarding the southern African sovereign’s finances. If they had knocked themselves out, in place of buying it, they might have been better off. Issued at 5 per cent, the 0m bond due in 2022 yields 12 per cent in today’s markets. It changes hands for 70 cents in the dollar, another casualty of the bust in commodities and African currencies. At least Zambia’s bondholders could read about what they were in for. One year later, buyers of a 0m bond issued by Mozambique’s newly-founded state-owned tuna fishing company (alias Ematum, alias Mematu) had rather less reading material to work with. Three pages of paper explained to investors (or, more precisely, did not explain) what a country with a grand total of one national-flagged tuna vessel, plus 2,800 miles of coastlines, planned to spend on with Ematum. Since the bond technically comprised loan participation notes, which packaged bank loans to Ematum from Credit Suisse and Russia’s VTB, it could disclose relatively little about this to investors versus a full sovereign Eurobond. A subsequent contract with a French shipmaker to build 24 fishing boats – but also, 3 HSI32 interceptor vessels and 3 Ocean Eagle patrol trimarans – clued them in later on.

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When Zambia issued its first international bond, in 2012, investors could knock...

Joseph Cotterill
Joseph is the FT’s Southern Africa correspondent based in Johannesburg, after previous stints as private equity correspondent and on the Lex column. But he still writes for Alphaville, which he joined way back in March 2010 — right in the middle of the Greek bailout crisis. He has been very interested in all things credit and sovereign debt ever since…

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