Local firms unlikely to issue first private Eurobond, says CfC

CfC Stanbic Bank says it will take local companies some time before they can issue a foreign bond. The bank’s management said while the successful launch of the debut sovereign bond in June has set a benchmark for firms to issue similar bonds the first issue would most likely come from a multinational firm.

CfC Stanbic chief executive Greg Brackenridge said multinational corporations are more exposed and are, therefore, more willing to borrow internationally for their Kenyan subsidiaries.

“Multinationals present in Kenya are more likely to issue Eurobonds because they can leverage off of their global expertise when it comes to bond issues,” said Mr Brackenridge at a workshop on the Kenya Eurobond.

He noted that while there is still ample room for companies to borrow from the local debt market, at some point they may need to look abroad like their South African and Nigerian counterparts.

“After Nigeria and South Africa, Kenya is one of the largest economies in the region and some Kenyan corporates are outgrowing the capacity of local market funding and the introduction of the Eurobond market has just broadened the available options open to them,” he said.

READ: NSE launches foreign currency bonds trading

The local bond market has been active this year as Kenyan companies continue to raise billions of shillings. The process kicked off from the second half of the year. Bonds by Britam, UAP and NIC Bank have managed to raise a combined Sh13.5 billion in oversubscribed issues while CIC Insurance is in the market for Sh5 billion.

Kenya’s first sovereign bond was launched in June and was heavily oversubscribed, managing to attract bids worth $8.8 billion but the government ended up accepting $2 billion in two tranches.

The Treasury accepted the money through a five-year $500 million bond and a 10-year $1.5 billion bond. The Treasury secretary Henry Rotich said the bond issue has achieved the twin effect of attracting more international investors and setting a price guide for companies seeking to borrow from abroad.

“The sovereign bond has provided a benchmark that now facilitates the private sector to issue international corporate bonds in the international capital markets,” said Mr Rotich.

Utility providers Kenya Power and KenGen are some of the firms that have flirted with the idea of issuing Eurobonds to finance mega projects.

Companies such as South African parastatal Transnet have had success of raising funds from the international bond market. The firm floated a 10-year $1 billion bond in 2012 that was oversubscribed by eight times.