JPMorgan Sees Kenya Debut Opening Path for Corporate Eurobonds

Companies in Kenya, whose government raised $2.75 billion in debut Eurobond sales this year, may follow peers in South Africa and Nigeria with bond offerings in 2015, according to JPMorgan Chase & Co.

“Outside of Nigeria and South Africa, the country with the biggest potential for corporate issuance is probably Kenya,” Stefan Weiler, head of debt-capital markets for central and eastern Europe and sub-Saharan Africa at JPMorgan, said in a London interview yesterday. “There is still a lot of appetite from investors in the current environment to pick up yield and diversification opportunities.”

Taking advantage of historically low global borrowing costs, Kenya raised $2 billion in 10-year bonds and $750 million in five-year notes this year, which JPMorgan helped organize. African nations including Ethiopia, Ghana, South Africa and Ivory Coast set a record on issuance volumes this year as they invest in infrastructure from roads to water.

There are many sovereigns in Africa with benchmarks which can be used as a base for pricing and to facilitate access for companies to the international capital markets, Weiler said.

Johannesburg-based MTN Group Ltd., Africa’s largest wireless operator, last month raised $750 million from a debut 10-year Eurobond to fund expansion in new markets. Ecobank Transnational Inc.’s unit in Nigeria sold $200 million of 2021 notes in August. First Bank of Nigeria Ltd. raised $450 million in July and Access Bank Plc sold $400 million in 2021 notes in June.

While Africa will still be dominated by sovereigns next year, overall sovereign issuance in the CEEMEA region will decline next year, Weiler said. Corporate transactions will increase.

“The overall geographic split of issuance should be roughly in line with this year’s while Poland’s share may well rise,” Weiler said. “Corporates have significant capex needs in the energy and utility sectors and we should see more banks issuance,” he said referring to capital expenditure.

JPMorgan expects emerging-markets corporate foreign bond sales to be at $357 billion in 2015, in line with 2014, according to a research note from Nov. 26.

Yields on Kenya’s 10-year dollar bond fell 8 basis points since they were issued to 6.80 percent by 2:20 p.m. in Nairobi.

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