Ivory Coast Bondholders Must `Recognize' Gbagbo for Payment

What a joke!!

Ivory Coast Bondholders Must 'Recognize' Gbagbo for Payment

Jan. 17 (Bloomberg) -- Ivory Coast's $2.3 billion of Eurobonds fell to a record low as a spokesman for Laurent Gbagbo said the country will make a missed interest payment only if creditors recognize him as victor of the disputed presidential November elections.

The debt of the world's biggest cocoa producer declined 0.3 percent to 37.625 cents on the dollar as of 5:40 p.m. in Abidjan, the commercial capital, according to data compiled by Bloomberg. That drove the yield on the 2.5 percent debt due 2032 up 5 basis points to 16.893 percent.

"We did our part of the job and pledged to pay," Ahoua Don Mello, Gbagbo's spokesman, said by phone today from Abidjan. "It is now the turn of the lenders to do theirs." Ivory Coast's government under Gbagbo will invite creditors to the nation to discuss the terms of the coupon payment, he said.

"It's a joke, right?" said Phillip Blackwood, head of emerging markets at Sydbank A/S, Denmark's fourth-largest bank and holder of Ivory Coast debt. Sydbank hasn't received any of the missed payment, he said in a phone interview.

The West African nation missed an interest payment Dec. 31 on its bonds amid a political standoff over the results of the Nov. 28 election between incumbent Gbagbo, who refuses to step down, and internationally backed winner Alassane Ouattara. Payment terms carry a 30-day grace period. The Central Bank of West African States supported Ouattara at a Dec. 23 meeting of finance ministers of seven member nations, excluding Ivory Coast, giving him control over state reserves previously governed by Gbagbo.

Central Bank

"The expiry of the 30-day grace period is on everyone's radar screens and the lack of progress on the political front is not good news for the prospects of that coupon payment," Graham Stock, chief strategist at London-based Insparo Asset Management, said by phone.

Gbagbo, 65, who has ruled for a decade, cites a ruling by the Constitutional Council that annulled votes in parts of Ivory Coast's north on fraud allegations and gave him victory. Gbagbo has retained the loyalty of the army, while the United Nations, the African Union, the U.S. and France, the former colonial ruler, recognize Ouattara, 69, a former deputy managing director at the International Monetary Fund.

The incumbent is withdrawing money from the Senegal-based regional central bank, Don Mello said today. The bank said only people appointed by Ouattara would be able to withdraw funds. Marie-Laure Digbe, spokeswoman for the bank, was not immediately available to comment, according to a person who answered the phone at her office and declined to give her name.

'Untenable'

"Gbagbo's position is untenable," Standard Bank Plc analysts, including London-based Stephen Bailey-Smith, wrote in a report today. "Without international support and control" over all of the economy, "it is difficult to see Gbagbo's regime being able to finance a functioning state," they wrote.

Standard Bank sees "significant upside potential" if a resolution to the dispute can be found, which may make the country's debt sub-Saharan Africa's best-performing international sovereign notes this year.

Ivory Coast's main opposition group called for a nationwide strike tomorrow to force incumbent Gbagbo to stand down.

"Things are deteriorating," Blackwood said. "The likelihood points to non-payment."

Kenyan Prime Minister Raila Odinga, appointed by the African Union to help broker an end to Ivory Coast's election dispute, will hold further talks with Gbagbo and Ouattara this evening, according to a statement from his office in Nairobi.

The Ivory Coast international bond jumped 7.7 percent Jan. 11 after Finance and Economy Minister Desire Dallo sent a letter to bondholders dated the previous day saying the country would honor the obligation within the 30-day grace period.

To contact the reporter on this story: Olivier Monnier in Abidjan via Accra at ebowers1@bloomberg.net Chris Kay in London at ckay5@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net