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Kenya to Seek at Least $1.5 Billion in Debut Eurobond Sale

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Sept. 4 (Bloomberg) -- Kenya plans to raise at least $1.5 billion in a debut sovereign debt offering, Economic Secretary Geoffrey Mwau said, confirming the Treasury’s announcement last week that it will seek more than initially targeted.

The East African nation has been in the process of appointing lead advisers for the sale since June and once they’re chosen, the exact amount and timing will be decided, Mwau said in an interview today in the capital, Nairobi. East Africa’s largest economy may issue as much as $2 billion in the Eurobond market, Treasury Secretary Henry Rotich told reporters today.

Kenya’s government forecasts the region’s largest economy will expand 5.8 percent this year, the fastest pace in six years, from 4.6 percent in 2012. The world’s biggest black-tea exporter is following other sub-Saharan African nations including Zambia and Rwanda selling dollar-denominated debt, which will help plug a budget deficit and finance construction of ports, railways and power-generation projects.

The yield on Rwanda’s $400 million of 10-year bonds sold in April was unchanged at 8.89 percent by 11:32 a.m. in London compared with 6.92 percent at the end of April. Zambian debt due 2022 with a coupon of 5.375 percent gained one basis point to 7.85 percent from 5.16 percent when the debt started trading in September last year, according to data compiled by Bloomberg.

Like neighboring Tanzania, Kenya has repeatedly delayed plans to sell debt abroad since 2007 after market conditions deteriorated with the global financial crisis.

Rising Yields

Demand for emerging-market debt is waning on concern the U.S. may reduce monetary stimulus. Yields on dollar-denominated African government bonds have surged 1.7 percentage points since May 22 to 6.359 percent at yesterday’s close, according to JPMorgan Chase & Co. data.

Kenya may select lead managers in one to two weeks and the sale should take place by December, Rotich said in Nairobi. Mwau reiterated that $600 million of the bond proceeds will be used to settle a two-year syndicated loan agreed last year.

Last week, Treasury Permanent Secretary Kamau Thugge said in an interview that the country is considering selling more than $1 billion of sovereign bonds to fund infrastructure projects, while the Finance Ministry said in June it would seek $1 billion. Rotich originally set a target of end-September to tap international debt markets for the first time.

About half of Nairobi’s 3.1 million residents live in slums and 70 percent of people are unemployed, according to the city, while poorly maintained roads and drainage cause daily traffic jams and flooding. President Uhuru Kenyatta pledged to build a railway from the Mombasa port to Malaba on the Ugandan border and to more than double paved roads to 24,000 kilometers (14,900 miles) before winning elections in March.

To contact the reporter on this story: David Malingha Doya in Nairobi at dmalingha@bloomberg.net

To contact the editor responsible for this story: Paul Richardson at pmrichardson@bloomberg.net