Mozambique Tuna Bonds Fund Anti-Pirate Fleet in Surprise

November 13th, 2013  |  Source: Bloomberg

The deal that helped one of the poorest nations raise $850 million and bond investors lock in rates three times higher than U.S. Treasuries is also spurring concern some of the money isn’t going where the buyers -- and one of the underwriters -- expected.

Two months ago, Credit Suisse Group AG and VTB Capital Plc financed a flotilla of tuna boats for Mozambique, then packaged the debt into notes for overseas investors. It turns out the fleet also includes anti-pirate patrol boats, according to the French Foreign Trade Ministry. They are capable of being equipped with 20mm cannons and military drones, according to Stratfor, a global security advisory firm. Credit Suisse is adamant that its funding wasn’t used for armed boats.

“The documents mentioned only fishing boats and some training costs,” said Marco Ruijer, who helps oversee about $8 billion in emerging-market bonds at ING Investment Management in The Hague and bought a piece of the debt from VTB Capital because the investment promised such high returns. The notes are backed by the African country, which is developing deposits of coal and gas.

As central banks keep interest rates at historic lows, investors are trading transparency for higher payouts. Tanzania, with an unrated $600 million private deal, and Angola, with a $1 billion transaction structured in a similar way to Mozambique’s, also made debuts in the international debt market in the last 15 months without disclosing details that buyers of lower-paying Eurobonds would require.

Full story here:http://www.bloomberg.com/news/2013-11-13/mozambique-tuna-bonds-fund-anti-pirate-fleet-in-surprise.html




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