Gabon's international bonds and shares of European companies operating in the country experienced significant declines as a result of a military coup, leaving investors concerned about the nation's oil sector and conservation projects. The dollar bonds due in 2025 and 2031 witnessed a market value drop of around 10%, marking the largest decline among emerging-market peers. This decline was particularly pronounced as European trading began. Companies such as Eramet SA, Maurel & Prom, and TotalEnergies SE, which have operations in Gabon, saw their shares fall in Paris with surging volumes.
This coup, which marks the ninth military seizure of power in Africa over the past three years, highlights the uncertainty associated with investing in frontier nations, especially during a challenging global economic period marked by elevated inflation and increased political risk. Not only does it undermine the outlook for Gabon's bonds, but it also raises concerns about the impact on debt securities in neighboring countries like Cameroon, according to Mark Bohlund, a senior credit research analyst at REDD Intelligence.
"While Central Africa may not have experienced as many military coups as West Africa recently, there is still a concern of contagion," Bohlund explained. "Cameroon and the Republic of Congo, in particular, share a similar dissatisfaction with long-time rule and the potential for dynastic transitions."
The dollar bonds due in June 2025 from Gabon experienced an 11-cent decline to 82.33 cents on the dollar, showcasing the worst performance on the Bloomberg Emerging Markets Sovereign Index. The yield on these bonds nearly doubled to 20%, reaching the highest level since their initial issuance in 2015. Similarly, the security maturing in November 2031 experienced a loss of 9.5 cents.
The bond losses are worrying for investors who participated in Gabon's recent debt-for-nature swap. This form of fundraising for countries committed to environmental protection has gained popularity. The $500 million deal helped Gabon reduce its debt and secure funds for marine conservation.
"The debt-for-nature swap has been completed and will not be directly affected," Bohlund reassured. "However, the price of the bond issued by the Gabon blue bond master trust is likely to experience a less severe decline compared to the unguaranteed Eurobonds."
Eramet, a mining group that produces manganese in Gabon, saw its shares plummet by 19%, accompanied by trading volume about 15 times the 30-day average for this time of day. As a precautionary measure, the company has temporarily halted its mining and train-transport operations.
The high-yield senior unsecured bonds due in May 2028 from Eramet dropped by 7 cents on the euro to 93.2 cents. Bonds maturing in 2025 also experienced a decline of 3 cents, reaching 97.3 cents.
Shares of Maurel & Prom, which recently announced a $730 million deal to acquire Gabonese firm Assala Energy, plunged by 20%. However, the company remains optimistic about the deal's outcome and clarified that its production in the country remains unaffected.
TotalEnergies, a long-standing key player in Gabon, witnessed a 15% drop in its listed unit, Total Energies EP Gabon. Additionally, Panoro Energy, an oil producer in Gabon based in Norway, experienced a decline of 5.4%.