June 22, 2012 / 2:09 PM / in 5 years

Gabon pays delayed Eurobond coupon: government

LONDON (Reuters) - Gabon has paid a delayed coupon on its $1 billion Eurobond after settling a dispute with a South African company that had frozen bond payment funds via a court order, an adviser to the Gabon government said on Friday.

Gabon's President Ali Ben Bongo waits for the arrival of France's President Nicolas Sarkozy at Franceville airport on February 24, 2010. REUTERS/Eric Feferberg/Pool

This means Gabon, one of the few sub-Saharan African countries to have issued dollar bonds, has managed to avoid falling into default because it has paid the $32 million coupon, originally due on June 12, within the 10-day grace period.

“The coupon has been paid...as we said we would do,” Serge-Maurice Pambou, adviser to Gabon’s economy minister, told Reuters.

This was the second time Gabon was forced to delay payouts to bondholders, following a previous case in 2008 and Pambou said there would be no repeat.

“Following the instructions of the head of state, the government has been asked to...make sure things like this do not happen again,” he said.

Earlier on Friday, Standard & Poor’s affirmed its BB- rating on Gabon with a stable outlook.

“We consider that the delayed coupon payment was unrelated to Gabon’s ability and willingness to make that payment,” S&P said.

“In our view, the government moved quickly to unfreeze the funds in order to service its debt within the contractual grace period.”

The bond was issued in 2007. It was trading at a yield of 4.45 percent on Friday. It has not shown much reaction to the payment delay, possibly because investors reckon that oil-rich Gabon, Africa’s sixth-largest oil producer, has enough money to pay its debts.

“It was a technical glitch and they were very vocal that they would pay,” said a fund manager in London.

“Investors had some degree of comfort that they have the capacity and willingness to pay.”

The court order freezing the funds was obtained by South African conglomerate Aveng and its banker Nedbank confirmed to Reuters on Friday that the matter had been resolved.

Nedbank said the dispute with Gabon dated back to 2001 and related to the construction of housing units.

In 2008 Gabon was several days late on paying the coupon on the Eurobond after the funds were frozen in London by another third-party creditor.

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