Kenya’s Sh87bn Eurobond attracts top global lenders
Treasury Building in Nairobi. Proceeds of the Eurobond were factored in this year’s national budget to help the Treasury partly bridge a yawning Sh330 billion deficit. FILE
Kenya’s Sh87 billion ($1 billion) Eurobond has attracted the interest of major international banks, defying subdued appetite for assets from emerging and frontier economies, the Financial Times of London has reported.
Proceeds of the bond were factored in this year’s national budget to help the Treasury partly bridge a yawning Sh330 billion deficit which is equivalent to more than 8.7 per cent of the GDP.
“Kenya is moving ahead with plans to launch a debut $1 billion sovereign bond before the end of the year and is receiving bids from banks interested in managing deal,” the FT said quoting sources familiar with the ongoing transaction.
The FT report said Kenya’s Eurobond had caught the eye of international lenders, but predicted the country would pay a higher cost for the debt following the recent increase in interest rates.
Debt yields have arisen after head of the US Federal Reserve, Ben Bernanke, announced in mid June that the four-year long massive cash injection programme, also known as quantitative easing (QE), would be wound down later this year.
Analysts have estimated that Kenya’s Eurobond would cost up to 8.0 per cent in annual interest payments using the recent $1 billion bond by Ghana as a yard stick.
Ghana borrowed the money at a coupon rate of 7.875 per cent, but its economy is growing at a higher rate than Kenya’s fuelled by recent oil discovery.
Ghana’s GDP growth was about eight per cent in 2012 and is expected to hit the same level this year. This is compared to Kenya’s 4.6 per cent last year and an expected 5.0 per cent this year. But Ghana’s public debt stands at about 49 per cent of GDP compared to Kenya’s 44 per cent.
The rise in yields in markets of developing countries have also seen Senegal’s intention to issue a bond in June this year be put on hold.
The FT said the issue was put on hold because the country could be forced to “pay up to 8.75 per cent to return to international markets.”
“Senegal coming to market is not a foregone conclusion…. One of the main reasons for issuing the eurobond was to access long-term infrastructure finance but they have seen that they can do the same regionally and that has opened a whole new set of alternatives,” Beila Fofana, chief executive of Mikaty Capital, a Johannesburg-based capital markets consultancy, was quoted as saying.
Alexander Muiruri, a bond dealer at the Nairobi office of African Alliance Investment Bank, said in an earlier interview that Kenya was in a position to raise the Eurobond for up to 8.0 per cent coupon rate or about half a percentage point higher than the rate Ghana paid to obtain a similar amount.
“Ghana’s government recently issued a ten-year $1 billion sovereign bond at 7.875 per cent. Our cost could likely range within the 7.50-8.00 range based on the Ghana case,” said Mr Muiruri.
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