Treasury settles Sh10.8bn interest on maturing Eurobond

Cabinet Secretary, National Treasury & Economic Planning, Njuguna Ndung'u.  

Photo credit: File | Dennis Onsongo | Nation Media Group

Kenya says it has paid the $68.7 million (Sh10.8 billion) interest due on the $2 billion (Sh312 billion) Eurobond that matures in July 2024, a day after it emerged that it had dropped the initial plan to make an advance payment of the principal before the end of 2023.

The Treasury yesterday kept off the question on the government's U-turn on the advance payment, which is set to spook the markets, after the country failed to make the early payment of Sh47 billion ($300 million) promised.

In a statement yesterday, the exchequer noted it had settled Sh10.8 billion in interest due this month without delving into the details of the early buyback announced previously by President William Ruto.

“The timely settlement of interest payments on the Eurobond has not only sent a positive signal to investors but has also resulted in a reduction in yields of Kenya’s Eurobonds in the global financial markets. The final interest payment on this Eurobond is scheduled for the last week of June 2024, alongside the repayment of the principal amount of $2 billion (about Sh312.1 billion at current exchange rates),” National Treasury Cabinet Secretary Njuguna Ndung’u said yesterday.

Last week, the director-general of the Public Debt Management Office Haron Sirima signalled a U-turn from the original plan of settling part of the June maturity indicating that the government was awaiting advice from the lead managers on a new date for the early buyback next year.

The move to make an early payment of the Eurobond principal was aimed at assuring jittery investors that Kenya was ready and capable of settling the Eurobond upon its maturity in June 2024.

A bond buyback would allow Kenya to retire its outstanding debt to the Eurobond noteholders, wholly or in part before its maturity date.

In the run-up to the proposed early buyback, however, the authorities were yet to disclose the route used in making the early repayment with the sizable proposed redemption requiring the issuance of a tender offer, according to market analysts.

On Friday, while acknowledging plans for an early buyback, Treasury Principal Secretary Chris Kiptoo indicated any such actions would be dictated by prevailing market conditions.

“Indeed, the government planned to undertake the buyback before the end of December 2023. The decision as to when to access the market shall be guided by the government-appointed joint lead managers and legal counsels based on the market conditions,” he told the Business Daily.

Kenya has been hoping to deploy its recently accessed repository of concessional funds from multilateral lenders such as the IMF to finance the early buyback. The buyback is expected to trim the outsized redemption ahead of the bond’s full maturity at the end of June.

PAYE Tax Calculator

Note: The results are not exact but very close to the actual.