Gabon may pay delayed bond coupon soon

LONDON Wed Jun 20, 2012 6:01pm BST

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LONDON (Reuters) - Investors awaiting a delayed coupon on Gabon's $1 billion Eurobond may soon be paid as a South African company that had frozen bond payment funds via a court order said on Wednesday it was close to resolving its dispute with the government.

This is the second time Gabon, one of the few sub-Saharan African countries to have issued dollar bonds, has been forced to delay payouts to bondholders. In 2008 a payment was made several days late after the funds were frozen in London by a third-party creditor.

On this occasion the $32 million coupon was due on June 12 but funds for the payment were frozen by a court order at Gabon's paying agent Citi, the government of the oil-rich country told Reuters earlier on Wednesday.

"Following a judgment against Gabon as guarantor obtained by a creditor, a court order has attached the funds at Citi intended for the coupon payment," the statement, sent by Gabon's advisor, Lazard, said.

It said the coupon payment would be made as soon as possible.

Lifting the court order soon is crucial if Gabon is to avoid falling officially into default. The bond terms give it a 10-day grace period.

An executive at South Africa's Nedbank confirmed that his client, conglomerate Aveng, was the creditor who had obtained the court order in London. He said Aveng and Nedbank had agreed to a Gabon government proposal to settle the dispute.

"The Gabonese government has come with a proposal to resolve the matter and we have accepted the terms of their proposal. However certain payments need to be made before we lift the freezing order," Brian Kennedy, group managing executive for Nedbank told Reuters from South Africa.

"We are agreeable to the proposal and we are waiting for the implementation thereof," Kennedy said, adding that lifting the court order and unfreezing the cash could be a "matter of hours.

The Eurobond, said to be held by a few large funds, is trading with a yield of 4.3 percent.. Analysts said it fell 1-1.5 points earlier this week but has recovered since then.

The bond was issued in 2007 with an 8.2 percent coupon and was almost two-and-half times oversubscribed, reflecting investors' hunger for African credit in general but for oil-rich, relatively wealthy Gabon in particular.

However, Richard Segal, an analyst at Jefferies, said investors had hoped there wouldn't be a repeat of the coupon delay they had experienced in 2008.

"This is a risk because historically Gabon has had a lot of arrears (to suppliers) and if any small creditor can attach the bond payments, it can cause a lot of havoc."

Kennedy said Aveng and Nedbank had not been the creditors behind the coupon delay in 2008. He declined to say how much was owed to Aveng but said the claim on Gabon dated back to 2001.

Gabon use to be one of Africa's top crude oil producers with output peaking at about 370,000 bpd. However, production has dwindled in recent years due to maturing fields and President Ali Bongo, who took over from his father and won re-election in 2009, is seeking to diversify the oil-dependent economy and attract investments in its mining, timber and services sectors.

(additional reporting by Bate Felix and Carolyn Cohn; editing by Ron Askew)

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