Gabon becomes the first African country to initiate the brilliant debt-for-nature swap, for up to $450 million


Gabon launched what is set to be Africa’s first debt-for-nature swap on Tuesday, with a plan to buy up at least $450 million of its government debt and switch it to an eco-friendly blue bond.

Gabon’s beaches and coastal waters host the world’s largest population of leatherback turtles, with estimates putting it at nearly a third of the global population of the endangered species.

At their simplest, debt-for-nature swaps see a country’s debt bought up by a bank or specialist investor and replaced with cheaper ones, usually with the help of a multilateral development bank “credit guarantee” or “risk insurance”. The savings are intended to be used to fund conservation.

In a regulatory filling by the central African country on the London Stock Exchange, it said it had “launched invitations to tender for purchase by the Republic for cash its 2025 Notes and 2031 Notes”.

Gabon becomes the first African country to initiate the brilliant debt-for-nature swap, for up to $450 million

This prompted the three Eurobonds that it referred to rise as much as 2.2 cents on the dollar.

The February 2031 maturity rose 2.203 cents to 83.702 cents and November 2031 maturity jumped 2.129 cents to 83.573 cents, compared to Gabonese government’s offer to buy back the bonds for 85 cents per $1 of the bond.

The 2025 maturity rose 1.194 cents to 95.4 cents, also still below the offer price of 96.75 cents..

The deal has long been anticipated. Industry sources told Reuters this year that the U.S. International Development Finance Corporation (DFC) would provide political risk insurance as it has in similar recent deals in Ecuador and Belize.

Ecuador pulled off a record $1.1 billion debt-for-nature swap in May, freeing up $18 million annually for the next 20 years for conservation of the Galapagos Islands.

A handful of other African countries are also working on debt-for-nature deals, bankers have said, along with Sri Lanka and a clutch of Caribbean and Indian Ocean islands.

The African Development Bank and European Investment Bank are interested in providing credit guarantees. Multi-country deals could also be on the horizon in the fast-developing asset class.

Bank of America (BAC.N) is helping to orchestrate the Gabon deal according to media reports. A spokesperson declined to comment.

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