Nairobi raises extra Sh67bn from global bond market

Kenya has raised an extra Sh67 billion ($750 million) from the international bond market at an average interest rate of 5.5 per cent, a price lower than that of the initial Sh180 billion ($2 billion).

Treasury Cabinet Secretary Henry Rotich said that subscription in the new deal reached Sh270 billion ($3 billion) even though they were seeking Sh67 billion only.

In the debut offer, which had two portions, the interest rate (coupon) was 5.875 per cent for the first Sh500 million with a tenor of five years and 6.875 per cent for the second portion of the bond with a tenor of 10 years.

In the re-opened bond, the first part amounting to $250 million (Sh22.5 billion) had a yield of five per cent with a tenor of five years while the other part of $500 million (Sh45 billion) had a yield of 5.9 per cent with a 10-year maturity.

Performing well

“The over-subscription is an indication that foreign investors continue to have confidence in the future prospects of our country,” said Mr Rotich.

He said that the two tranches of the re-opened bond are identical in all material features to the inaugural bond “but were issued at current favourable prices.”

Following the successful re-opening of the bond, Mr Rotich said the raising of more cash through the sukuk (Islamic) and samurai (Japanese-like) bonds would only happen in the next fiscal year starting July 2015.

The minister said the re-opening, also called a tap, enabled the Treasury to raise the cash at lower transaction costs, which include fees paid to the arrangers.

“We chose a tap on the back of our inaugural bond as it enabled us to issue additional debt at much lower transaction costs than a new issue,” said Mr Rotich.

“The earlier bond was performing well on the Irish Stock Exchange as it was commanding a premium over the yield at which it was originally issued, he said.