Kenya seals third Ksh.210B Eurobond

Kenya has successfully issued a third Eurobond priced at Ksh.210 billion (USD 2.1 billion) following a successful road show in United States and the United Kingdom.

The newly acquired bond is composed of a dual-tranche, 7 year and 12 year tenure priced at an amortization rate of 7 and 8 percent respectively.

The low interest rates makes for a case of a strong investor appetite for Kenyan debt uptake by investors represented by a 452 percent over subscription with the issue having attracted bonds worth Ksh.950 billion (USD 9.5 billion)

“Throughout the roadshow, the investors appreciated and welcomed the strong and resilient economic growth that Kenya has welcomed and the expected growth in 2019,” noted Treasury Cabinet Secretary Henry Rotich.

Proceeds from the issuance are expected to finance a number of development projects, fund the general budgetary expenditure and refinance part of the outstanding debt redemption obligation from the first Eurobond which totals to Ksh.75 billion (USD 750 million) as the June 24th 2019 maturity date closes in.

Both the 7-year and 12-year tenors are expected to be amortized equally at the rate of Ksh.30 billion and Ksh.40 billion in 3 years to the run-up of their maturity to avert a spike in repayments.

The issuance eases government cash-crunch with the State seeing an increased debt service obligation in the upcoming 2019/20 financial year which breaches Ksh.1 trillion for the first time.

The pricing of the new debt and the moderate interest rate is against a deterioration of Kenya’s credit risk with the IMF for instance reclassifying the county’s risk from low to moderate in October 2018.

The issuance also comes against the withdrawal of the IMF standy credit facility (SCF) following the expiry of its extension which run from March to September 2018.

While Kenya has seen a deterioration of its credit pricing, the economic fundamentals have held internally.

Usable foreign currency reserves have for instance remained well above the 4.5 month’s statutory threshold closing 2018 at Ksh.820 billion (USD8.2 billion) representative of a 5.3 months import cover.

The current account deficit has meanwhile narrowed to 5 percent over the same period from a balance of 6.5 percent of Gross Domestic Product (GDP) in 2017.

The issuance has also been supported by a strong economic output as GDP growth came in at 6.3 percent in an year of the agricultural sector’s rebound under improved weather conditions.

The close of the third issue of the Eurobond represents the third entry of Kenya in the International Debt Capital Markets following the issuance of bonds worth Ksh.200 billion (USD2 billion) in June 2014 which tapped a further Ksh.75 billion (USD 750 million) and the recent dual-tranche issue of another Ksh.200 billion in February 2018.

The bond has since been listed on the London Securities Exchange (LSE) bourse following its successful marketing in London, Boston, Los Angeles and New York.

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