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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: Cogito Ergo Sum who wrote (64800)	7/22/2010 1:22:47 AM
From: elmatador	Read Replies (1) \| Respond to of 217699

Angola's debt bombshell: shock admission that it has $9 billion in unpaid building bills has sunk any immediate chance of issuing up to $4 billion in foreign debt but may mark a turning point for its secretive rulers. Angola's debt bombshell leaves bond plans in ruins Wed Jul 21, 2010 5:13pm GMT Shock admission of $9 billion in unpaid building bills * Debt repayment depends on oil prices * "Forget about" eurobond plans By Ed Cropley, African Investment Correspondent JOHANNESBURG, July 21 (Reuters) - Oil-rich Angola's shock admission that it has $9 billion in unpaid building bills has sunk any immediate chance of issuing up to $4 billion in foreign debt but may mark a turning point for its secretive rulers. The mess stems from Angola's reliance on oil for more than 80 percent of its official revenues, and the building boom that has gripped the country, and especially its capital, since a long civil war ended in 2002. When oil prices collapsed in late 2008, revenue dried up but the construction wave that has turned Luanda into one of the world's most expensive cities churned on regardless. Lots of shiny new soccer stadiums for the African Cup of Nations soccer tournament in January only made matters worse. Even though it produces 1.5 million barrels or more of oil a day, $9 billion is a large sum for the country of 16 million, equating to a quarter of the annual budget and nearly two-thirds of stated foreign exchange reserves. A degree of fuzziness with official data is common in most of frontier Africa, and investors had known for months Angola had fallen behind with payments to the Portuguese and Brazilian firms rebuilding after the end of the civil war. But the sheer size of the arrears -- around three times prior estimates -- and the cack-handed nature in which they became known, with President Jose Eduardo dos Santos putting the debt at $6.8 billion on Monday only to be trumped by the Finance Ministry with $9 billion on Tuesday, left outsiders speechless. "Wow. It's shocking. These are huge amounts," said Coura Fall, an African frontier market analyst at Citibank in Johannesburg. "They can forget about any eurobond now." "People are asking questions about the finances. What is the government revenue on a monthly basis? How much do they owe to other creditors? Who do you trust?" CAN PAY, WILL PAY -- EVENTUALLY In a rare news conference, dos Santos, who has been in charge for 30 years, said all debts would be honoured, with smaller firms being paid in full in two months and larger ones getting 40 percent this year and the rest "in one or two years". But his words are unlikely to fill prospective investors with confidence, especially since the chances of being paid depend on the direction of oil prices. Another sustained drop because of a "double-dip" world recession would be disastrous. "It would make you think twice about your ability to be paid," said Stuart Culverhouse of London-based brokerage Exotix. The bond issue, which already appeared to be dropping in Luanda's priorities, would "clearly be delayed", he added. However, Alex Vines, an Angola expert at the Chatham House think-tank in London, said dos Santos' unprecedented admission suggested there were no other skeletons in the cupboard, and could usher in the honesty outside investors so crave. The Finance Ministry has already decided to impose "more rigour and transparency" on government departments. "The history of Angola is that it does pay -- it's just quite slow," Vines said. "Of course this will be a reality check, but as long as it turns out to be accurate and isn't the tip of a greater iceberg of unpaid bills, investors should kind-of welcome this." IMF, RATINGS AGENCIES The revelations mark a rude return to earth for a country that sees itself as vying with Nigeria to be Africa's biggest crude producer, and a future darling of foreign investors with grand plans for a stock market and issuance of up to $4 billion in dollar bonds. What makes it worse is that Luanda, with bond issuance in mind, had received credit ratings from S&P, Moodys and Fitch in May with a favourable 'B+' outlook based on strong growth prospects and low levels of government debt. The agencies, though nervous about the secrecy in which dos Santos' administration cloaks itself, assessed external debt at 18 percent of GDP, or around $18 billion. The ratings followed the approval by The International Monetary Fund (IMF) of a $1.4 billion loan programme last year. In an assessment of the economy released in May, the IMF estimated Angola's 2009 external debt at $14.9 billion, and under "external arrears" -- which should include late payments to foreign construction firms -- listed a paltry $500 million. Yet the revelations of the debts scale was serious enough for Portuguese President Anibal Cavaco Silva to fly to Luanda this week to press for payment. (Additional reporting by Henrique Almeida)