Four banks shortlisted as lead arrangers for new Eurobond

The headquarters of JP Morgan Chase on Park Avenue in New York. FILE PHOTO | AFP

Four banks have been shortlisted as potential lead arrangers for Kenya’s planned return to the global financial markets between July and June 2024 as the government looks to ease the pressure in settling the $2.0 billion (Sh277.6 billion) Eurobond due next year.

The Business Daily has learned that Citigroup, JP Morgan, Standard Bank and Standard Chartered Bank have made it to the short-list for the planned issuance.

Two sources familiar with the matter further reveal that the selection of lead arrangers kicked off in April with the Treasury having published a request for expression of interest for international lead managers for issuance of a sovereign bond on April 18.

Citigroup and JP Morgan served as joint-lead managers when Kenya raised $1.0 billion through Eurobond in June 2021, with NCBA and I&M banks playing the role of co-lead managers.

The government planned to issue yet another Eurobond in the current financial year but opted to shelve the plan owing to tight global financial conditions that saw the yield trend upwards and render the plan unviable from a pricing standpoint.

On May 31, 2023, Treasury Principal Secretary Chris Kiptoo indicated the government was at an advanced stage of selecting lead arrangers for the Eurobond slated for issuance in the next financial year.

The issuance has been identified as one of the ways through which the government can settle the maturing bond which was floated a decade ago.

“The National Treasury is at an advanced stage of procuring lead managers to provide advisory services in the next few weeks. In the meantime, the government will meet all other external debt service payments due through revenues and refinancing,” Dr Kiptoo told members of the National Assembly Budget and Appropriations Committee on May 31.

According to the draft budget estimates for 2023/24, the Treasury has earmarked Sh241.8 billion for the redemption of the maturing Eurobond, accounting for 50.8 percent of the total external debt redemptions for the next financial year.

At a distant second in external redemptions for the next financial year is the Exim Bank of China at Sh88.9 billion.

“A Eurobond worth $2.0 billion which is approximately Sh241.8 billion will be maturing on June 24th, 2024. To settle this Eurobond at maturity at minimum cost, the government is considering several options, including liability management operations including alternative financing solutions to settle maturities; undertake buy backs which means tender offered through open market operations or a bond switch exchange with different longer tenured bonds,” the PS said.

Kenya’s planned return to the global markets comes when the country has received bucket loads of concessional financing, including $1.0 billion (Sh138.0 billion) in budget support financing from the World Bank’s Development Policy Operation (DPO) window and enhanced financing from the IMF following conclusion of the fifth review earlier in May.

The government has repeatedly shrugged off fears of its ability to service the obligations of the Eurobond due for maturity in June 2024.

“On the upcoming 2024 Eurobond maturity, the government has received over 300 proposals offering various liability management solutions, as it embarks on effective liability management in the next fiscal year. The new administration is committed to managing public debt effectively and minimise any risks of default at all times”, Treasury CS Njuguna Ndung’u said in a statement.

The Treasury projects the borrowing for 2023/24 will stand at Sh720.1 billion of which external borrowing will be expected to mobilise Sh198.6 billion as the Kenya Kwanza government looks to finance its ambitious Sh3.6 trillion budget.

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