Kenya Said to Consider Eurobond Sale to Repay Existing Debt

Updated on
  • Government is said to consider options to pay syndicated loan
  • Demand for emerging-market debt drives borrowing costs lower

Kenya’s Treasury is considering selling a Eurobond in the year starting in July to refinance maturing debt, according to a person familiar with the matter.

The timing of the offering will be decided by Treasury Secretary Henry Rotich, said the person, who asked not to be identified because they aren’t authorized to speak about the matter. The Eurobond is among a number of options being considered as a two-year, $750 million syndicated loan falls due in October and the same amount in five-year Eurobonds in June 2019, the person said.

The government secured the syndicated loan from Citigroup Inc., Standard Bank Ltd. and Standard Chartered Plc in October 2015.

Kenya is mulling a return to international capital markets as a global hunt for higher returns drives an index of emerging-market bonds to near its highest level since November. It comes as President Uhuru Kenyatta prepares for elections in August that will pit him against Raila Odinga in a rematch of a 2013 vote.

The government is seeking to plug a spending deficit that’s forecast to narrow to 6 percent of gross domestic product from about 9 percent in the current fiscal year. The Treasury has said it’s also considering sukuk as a potential source of financing. Kenya’s government plans to borrow 256 billion shillings ($2.5 billion) from external creditors in the 2017-18 fiscal year, Rotich said on March 28.

Rotich couldn’t be reached for comment on his mobile phone, while Principal Secretary Kamau Thugge didn’t respond to calls and a text message seeking comment.

Debut Sale

Kenya sold its debut Eurobond in 2014 and used $600 million of the proceeds to settle a syndicated loan that had matured. The yield on Kenya’s 2019 securities fell 2 basis points to 4.1 percent by 10:36 a.m in London on Tuesday. Rates on the country’s $2 billion of bonds due June 2024 traded largely unchanged at 6.56 percent by 10:36 a.m in London, after dropping to their lowest since June 2015 last week.

East Africa’s largest economy may target issuance in the fourth quarter of 2017 when a new government is expected to be in place after the Aug. 8 elections, said Mark Bohlund, an economist at Bloomberg Intelligence. Spreading out maturing debt obligations over the long-term through another Eurobond issue is “likely to be an attractive option,” he said.

“Kenya remains among the better stories in sub-Saharan Africa with the allure of competitors such as Ivory Coast declining,” Bohlund said in emailed responses to questions. “This should support demand for a bond issue, but Kenya is unlikely to match the yields of recent bond issues such as Senegal.”

The yield at issue on the West African country’s $1.1 billion of bonds sold last week was 6.25 percent.

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