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Markets

Eurobond oversubscribed with Sh264bn bids so far

National Treasury secretary Henry Rotich. FILE
National Treasury secretary Henry Rotich. FILE 

Kenya’s first sovereign bond has received nearly twice the targeted Sh132 billion on its first session of sale, highlighting foreign investor confidence on a day of heightened security concerns following a terror attack that killed 50 people.

Reuters news agency quoted a Treasury official saying Kenya had received bids worth $3 billion (Sh264 billion) against a target of between $1.5 billion to $2 billion (Sh132-176 billion).

Analysts said the issue was attracting high demand because it comes in two tenors with a five-year tranche offering investors a minimum six per cent return and a 10-year portion guaranteeing a yield of seven per cent. These were lower than Treasury’s earlier estimate of slightly over eight per cent.

“I am not too surprised (by the demand) given the wider product offering,” a fixed-income trader in Nairobi was quoted in the Reuters report.

“Investors have a different appetite for debt depending on the duration and once the Eurobond market develops, you might find multi-tenor offers become more popular to cater for refinancing risk.”

The oversubscription comes in a day suspected Al-Shabaab militia attacked the coastal town of Mpeketoni, shooting indiscriminately and setting ablaze at least seven buildings.

Funds raised through the Eurobond will be used to retire a $600 million (Sh52.2 billion) syndicated loan — for which Kenya said last month it had received a three-month extension to the May deadline — and for development projects.

The government accepted an offer by the three arranging banks to extend the loan at the same terms, even though it had enough money to repay the entire loan, which had matured on May 15.

Citigroup Inc., Standard Chartered Bank Plc and Standard Bank Plc arranged the two-year syndicated loan at an interest margin of 475 basis points more than the London interbank offered rate.

Taxpayers lost Sh1.2 billion following the loan default. Treasury paid Sh570 million in extension fees while the interest amount for the three months would be Sh700 million. The repayment extension highlights the “refinancing risk” faced by some African nations that may not have sufficient reserves to pay debt, Fitch Ratings said earlier.

The fundraiser has been delayed by volatile markets and by the dispute over the Anglo-Leasing contracts, which Parliament argued were issued by past governments and violated laws and regulations. 

President Uhuru Kenyatta directed the Treasury to settle the long-running row over the Sh1.4 billion Anglo-Leasing payments, paving the way for the issuance of the bond.

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