NEW YORK - A planned $500 million bond sale from Papua New Guinea, a country that has tried and failed to sell foreign debt before, will test whether investors are still receptive to riskier borrowers after a selloff in emerging markets.
The offering could conclude this week, and would mark the first sale of junk-rated sovereign-dollar debt since July, when Angola sold $500 million in 30-year bonds, according to Dealogic.
In recent months, rising US interest rates and a stronger dollar have hit emerging-market stocks and bonds. That has made it harder for developing nations and companies to borrow, especially those with junk, or below investment-grade, credit ratings.
A young democracy grappling with crime, corruption, and natural disasters, Papua New Guinea met international investors in 2013 and 2016 but didn’t sell dollar bonds. The country is rated single-B by S&P Global, and has a similar B2 grade from Moody’s , putting it roughly on par with Belarus, Egypt and Pakistan.
The nation of roughly eight million people is now offering a yield of about 8.5%, several investors said. These bonds will have a 5-year maturity, and the country could also sell 10-year bonds, some investors said.
“Usually when we see these kinds of deals, people joke that we’re at the top of the market. But we’re in a bear market,” said Samy Muaddi, a lead portfolio manager for emerging-markets bonds at T Rowe Price.
Papua New Guinea says the proceeds will help refinance existing debt, as well as fund infrastructure projects and its hosting of the regional Asia-Pacific Economic Cooperation meetings later this year.