UBA Kenya Bank parent UBA Group has pledged Sh19.3 billion ($150 million) into Kenya’s roads bond which seeks to clear pending bills in the road sector through securitisation.
The lender will become a key financier for the bond expected to raise Sh175 billion to cover historical arrears to road contractors.
UBA Group and other investors buying into the bond will be paid using collections of Sh7 per litre of petrol or diesel from the Roads Maintenance Levy Fund.
The government raised the levy from Sh18 per litre to Sh25 in July last year for the purpose of securitising the payment of pending bills to the sector.
UBA Group says the commitment to participate in the Kenya Roads Board (KRB) bonds programme underlines the lender’s commitment to supporting the country’s infrastructure goals.
“UBA remains an unwavering partner for Africa’s progress. Our $150 million infusion into Kenya’s roads levy securitisation programme is testament to our unshakable confidence in the country’s potential,” UBA Group Managing Director and chief executive officer Oliver Alawuba said.
The Trade and Development Bank has been the lead arranger for the roads bond. The pricing for the paper is yet to be settled though some sources at the National Treasury have indicated an investor return set at 1.5 percentage points above the prevailing 91-day Treasury bill, which others want to rate to match that of an infrastructure bond. KRB is however yet to disclose the tenor of the bond.
The roads board has already been paying verified pending bills in the sector through a Sh60.6 billion short-term commercial bank loan. UBA Kenya Bank, a subsidiary of the UBA Group says the financing by the parent is testament to the lender’s strategy of being the go-to financial partner for infrastructure.
“This...cements our role as a trusted ally to the Kenyan government, businesses and communities,” said UBA Kenya Bank CEO Mary Mulili.KRB is set to issue a further Sh125 billion bond by securitizing an additional Sh5 from the RMFL to cater for future bills in the roads sector.
A special purpose vehicle -Oak Assetco SPV Limited was established to hold the Sh5 per litre collection from the fuel levy.
TDB is also the lead arranger and transaction advisor for the second bond.
