Kenya to issue it’s second Eurobond

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Kenya seems to be taking the path of Egypt and Nigeria in being the 3rd African country to borrow from the international markets this year. The new “Eurobond” will help offset maturing debts which could close in on Ksh700 billion this year.

According to a confidential source from one of the four international lenders involved in advising Kenya, the Eurobond will be floated before the end of next month. An early March issue is more likely.

A previously floated Eurobond in 2014 brought serious accountability questions from the opposition with issues raised about how banks handled the money. The banks included Citigroup, JP Morgan chase, Standard chartered and Standard Bank.

The Treasury officials remained mum over the details of the impending issue of the new Eurobond after $2.8 billion (Sh278.4 billion) was raised in debt issue between June and December 2014.

The country paid its creditors and interest of between 5.9 and 6.9%. Proceeds from the new bond issue are expected to ease the pressure of mounting debt repayments, projected at Sh658.2 billion in the current year which ends in June and Sh1 trillion next fiscal year, on her sluggish revenue.

The country is expected to borrow between $1.5 billion (Sh151.9 billion) and $3 billion (Sh303.8 billion) to be repaid in 10 to 15 years, said sources familiar with the ongoing arrangements that gathered steam this week with a road show targeting investors in the US and UK.

Kenya will be following in the footsteps of Egypt which became the first country on the continent to tap the Eurobond markets this year, borrowing $4 billion (Sh405 billion) on February 13.

The most populous country in the Arab world will pay investors 6.6 percent for 10-year debt instrument and 7.9 percent for a 30-year tranche in an offering that received $12 billion (Sh1.2 trillion) bids from investors.

“African countries that put in place best reforms will benefit from that. They will find it easier, other things being equal, to go to the markets again to borrow.” Says Razia Khan, Chief economists for Africa, Standard Chartered Bank.

Kenya’s creditworthiness – a measure used by investors to set interest rate – was slightly dented on Tuesday after US credit rating firm Moody’s downgraded the government’s score to B2 from B1, with a stable outlook.

Moody’s cited fast-accumulating debt which stood at Sh4.6 trillion last December and pressure to repay the maturing ones amid modest growth in revenue in assigning Nairobi a lower score, basically telling international investors that investing in government’s securities is speculative and subject to high credit risk.

A section of analysts has, however, said the downgrade was not likely to affect the appetite of international investors for Nairobi’s debt because Moody’s is not Kenya’s official credit rating agency.

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Melissa Daniels
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