Treasury secures payment extension for Sh52bn loan
What you need to know:
Underwritten by Citigroup, Standard Chartered and Standard Bank, the loan was due for full repayment on May 16.
Rating agency Fitch Thursday noted that the extension is unlikely to affect Kenya’s loan credit rankings.
Kenya won a three-month extension on a $600 million (Sh52 billion) syndicated loan after its debut Eurobond was delayed, a senior Treasury official said Thursday.
The government took out the two-year loan at an interest rate of seven per cent in 2012 to fund development.
Underwritten by Citigroup, Standard Chartered and Standard Bank, the loan was due for full repayment on May 16.
“What we have done is just to extend the repayment ...by another three months as we continue discussions on the sovereign bond,” Finance PS Kamau Thugge told Reuters.
Kenya’s first dollar bond worth up to $2 billion (Sh174 billion), part of which would retire the loan, was delayed again last month by a political row over payment of debts to international firms.
Parliament opposed payments worth a total of Sh1.4 billion ($16 million) to two foreign firms, saying they involve deals made a decade or more ago that a parliamentary committee said were awarded by past governments in violation of laws.
British and Swiss courts ordered the payments be made. The Finance Ministry must either ignore the MPs’ request or ignore an international legal ruling, which could harm Kenya’s reputation as it seeks to borrow more in international markets.
A group of lawyers asked the High Court to stop the government from paying the two firms, a request the High Court declined last week. The lawyers are appealing against the ruling.
Mr Thugge said he was “hopeful” the process of issuing the Eurobond would be completed.
This come as the rating agency Fitch Thursday noted that the extension is unlikely to affect Kenya’s loan credit rankings. Kenya is also prepared to pay investors not keen to wait till August 15 when the three-month expansion expires.
“The creditors had proactively offered this option to the authorities as part of a debt and reserves management operation, and it is not the case that without the extension, a missed interest or principal payment would be likely,” said Fitch.
“It will therefore have no impact on Kenya’s sovereign rating.”
The agency says that Kenya had offered to settle the debt from its reserves that stands at $6.3 billion (Sh548 billion).
