The Treasury is considering using the same transaction arrangers it had appointed three years ago to advise on the issue of the $1 billion (Sh85 billion) sovereign bond in the next financial year to speed up the borrowing plan.
Barclays Capital and Deutsch Bank had been appointed as the lead arrangers for the issue in 2009, before it was postponed following onset of the global financial crisis.
“We had done road shows for the bond. We may go for the same arrangers to save on time in the next financial year. But the final decision is yet to be made,” said Felister Kivisi, senior assistant deputy director in the debt management department at the Treasury.
The bond is expected to provide the government with funds to settle the $600 million syndicated loan taken early this year and use the rest for infrastructure development.
The cost of the bond is also expected to be lower than that of the syndicated loan, procured at a rate of 6.73 per cent including the fees and commissions on annualised basis. However, the bond is expected to be for a longer maturity period unlike the loan that was only for two years.
Ms Kivisi said by the time of issuing the bond, the Treasury expects to have had a new credit rating from Standard & Poor’s. The last rating by S&P showed the country was considered to be B+ with a stable outlook.
“The most S&P rating of Kenya is favourable. Possibly, there will be another rating before the bond is issued,” said Ms Kivisi.
Kenya will be among the rising number of African countries that are tapping into international markets in the last few years.
Zambia recently raised $750 million in a sovereign bond priced at 5.6 per cent.
The bond attracted bids worth $12 billion.
A similar bond by Ghana in 2007 brought $3 billion although the country was only looking for $500 million but ended up taking $750 million.
Kenya could manage to get high subscription similar to that of Zambia or Ghana.
London-based Capital Economics, which advises institutional investors, has estimated a Eurobond by Kenya with a tenor of 10 years could be priced at 7.5 per cent, close to the rates of such potential issues by its neighbours Tanzania and Uganda.
But unlike in the case of Zambia, it says investors in the Kenya Eurobond would demand a higher yield due to the latter’s less favourable macroeconomic status.
Kenya has a higher public debt — net of government and related deposits — of 45 per cent, its current account deficit is close to ten per cent and its fiscal deficit is over six per cent.
Zambia’s public debt is much lower at 26 per cent, while its current account is less than one per cent and the fiscal deficit is less than five per cent.
But Capital Economics sees such a bond by Kenya having good reception from investors. It notes Kenya is among those with reasonable levels of governance similar to that of Zambia.
“It appears that Kenya, Mozambique, Rwanda, Tanzania and Uganda may be best placed to issue foreign-currency debt over the next few years. All have reasonable levels of governance that are similar to that of Zambia,” said Capital Economics last month.