Treasury to float Sh132bn Eurobond first week of June

The Treasury has said Kenya will issue its inaugural Eurobond in the first week of June after settling a long-running row over the Sh1.4 billion Anglo-Leasing payments.

National Treasury’s principal secretary Kamau Thugge on Wednesday told the Parliamentary Accounts Committee — which is preparing road shows for the Sh132 billion ($1.5 billion) bond — that they deposited documentation with the security exchange after due diligence.

“We were prepared to execute the bond by November. All we are left with is conducting road shows,” said Dr Thugge.

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.
The MPs are yet to approve payments awarded by two European courts, which the government says it’s required by law to settle before issuing sovereign debt.

Settling debt

President Uhuru Kenyatta last Thursday authorised the Treasury to pay the Sh1.4 billion, which was wired Monday to Europe.

Treasury said the government decided to settle the debt because of the rising interest rates and to protect Kenya’s reputation as a country that meets its contractual obligations. This would help protect the country’s assets abroad and maintain the current credit rating.

READ: AG stops another Eurobond blocking claim in New York

The two firms applied to international courts seeking to enforce the judgement and attach Kenyan assets abroad. It was estimated that the annual costs of non-settlement would be Sh21 billion, based on the cost of higher interest rates on domestic borrowing both for the public and private sectors.

Against ruling

This forced President Kenyatta to issue an executive order for the payment of the bill despite Treasury failing to get Parliament’s nod.

The Law Society of Kenya had asked the High Court to stop the government from paying, a request that was declined last week. The lawyers’ body is appealing against the ruling.

Funds raised through the Eurobond will be used to retire a $600 million (Sh52.2 billion) syndicated loan — for which Kenya said last week 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 last week.

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.

The repayment extension highlights the “refinancing risk” faced by some African nations that may not have sufficient reserves to pay debt, Fitch Ratings said in statement last week.