Kenya has sold a Sh210 billion Eurobond, the third in five years, despite rising concern over its ability to service its debt burden. The National Treasury Cabinet Secretary Henry Rotich says in a statement dated May 15, that the issuance “triggered an overwhelming response from investors” leading to an oversubscription of 4.5 times.
“The Government of Kenya, acting through the National Treasury and Planning, has successfully priced a new $2.1 billion, dual-tranche Eurobond of 7-year and 12-year tenors on 15th May 2019 in London, United Kingdom,” reads the statement.
The two tranches are priced at 7.0 percent for the 7-year tenor and 8.0 percent for the 12-year tenor. Mr Rotich says the money raised will be used to finance the budget and repay Sh75 billion 2014 Eurobond that is due to mature in June.
Treasury Principal Secretary Kamau Thugge says the new Eurobond will start trading Thursday.
The inaugural Eurobond was in June 2014 where a total of Sh280 billion was borrowed in five and 10-year tranches. The government went back for another Eurobond last year where it netted Sh202 billion in 10 and 30-year tranches. With the new Sh210 billion bond this year, Kenya will have raised in excess of Sh692 billion in three Eurobonds in five years.
In the coming year that starts in July, Treasury says it will explore five new bonds among them Chinese and Japanese bonds as it moves to find new alternatives to satisfy its insatiable appetite for debt. These new options on its radar include the Islamic financing instruments, green bonds, Samurai and Panda bonds and diaspora bonds over the medium term.
In seeking the new financing options, Treasury hopes to diversify the sources of external debt and reduce over reliance on current sources of debt financing.
Samurai bonds are yen-denominated bonds usually issued in Tokyo by non-Japanese companies. These bonds are subject to Japanese regulations. On their part, Panda bonds are Chinese renminbi-denominated bonds designed to allow borrowers to tap into China’s large investor base.
Kenya has been increasingly turning to China for debt to fund its infrastructure projects and this has seen China upstage Western countries to become Kenya’s biggest lender. Islamic financing instruments also known as Sukuk bonds seek to provide sharia-compliant capital and are popular in the Middle East nations while green bonds target lenders who are keen on funding climate and environmental projects exclusively.
Source Daily Nation