Kenya is offering a price premium of up to 5.5 percent to buy back up to half a billion dollars (Sh64.5 billion) of its existing two Eurobonds in efforts to ease financing pressures.
The tender offer, which opened on Wednesday, is targeting $350 million (Sh45.2 billion) on the 12-year bond maturing in 2032, and $150 million (Sh19.4 billion) on a 10-year bond that falls due in 2028.
The Treasury will fund the refinancing effort using proceeds of a new Eurobond whose sale opened at the same time as the buyback.
This is the latest in a series of bond buybacks by the government in the past two years — part of a wider liability management plan aimed at lengthening the maturity profile of Kenya’s public debt to ease repayment pressure on the exchequer.
A notice published on Wednesday by the London Stock Exchange (LSE) — where the bonds are listed — said that the government has priced the tender offer at $1,055 per principal bond unit of $1,000 for the 12-year paper, and $1,035 for the 10-year bond.
These prices represent premiums of 5.5 percent and 3.5 percent on the face value of the bonds, which is the amount investors would receive if they held the papers to maturity.
In a buyback transaction, the premium on a bond’s price is meant to entice the holder to sell instead of holding it to maturity.
The higher price also serves as partial compensation for the interest that the bondholder was due to earn by holding on to their investment.
“The Republic will pay for the notes… a purchase price equal to: $1,055 per $1,000 in principal amount of 2032 notes and in the case of the 2028 notes, $1,035 per $1,000 in principal amount,” said the LSE notice.
Kenya is the latest African country to take advantage of the current strong investor appetite for high-yielding but riskier emerging market debt.
The Republic of Congo carried out a similar buyback this month. Ivory Coast also entered the market on Wednesday to issue a 14-year dollar bond.
Kenya’s 2028 bond has an outstanding principal of $371.56 million (Sh47.94 billion), while the 2032 paper has a principal of $1.2 billion (Sh154.8 billion). The papers pay annual interest at 7.25 percent and eight percent, respectively.
The government will also pay the bondholders’ accrued interest on the bonds, which is the amount of interest that they have earned since their most recent semi-annual interest payments in August and November 2025.
Besides the price premium, a buyback hands bondholders their principal investment early, giving them an opportunity to reinvest the funds in other assets that may be offering higher returns.
This is the fourth Eurobond buyback executed by the Treasury in just over two years, helping it ease the near-term refinancing risk on external debt.
In February 2024, the Treasury undertook its first sovereign buyback of $1.5 billion (Sh193.5 billion) to partially refinance the $2 billion (Sh258 billion), 10-year tranche from 2014, which paid interest at 6.875 percent per annum.
This exercise was also meant to calm the markets, which had become doubtful of the government’s ability to retire the debt amid a dollar shortage at the time. To fund this debut buyback, the Treasury floated a new six-year, $1.5 billion paper at a rate of 9.75 percent, which matures in February 2031.
In March 2025, the Treasury carried out a partial buyback of $579 million (Sh74.7 billion) on a $900 million (Sh116.1 billion), seven-year bond that had a seven percent interest rate, and which was to mature in three equal instalments starting May 2025. The repurchase was financed using proceeds of a new 11-year, $1.5 billion paper issued at 9.5 percent.
The third buyback was done in October last year, targeting the same 10-year 2018 bond that is the subject of the latest refinancing transaction.
This buyback, which was funded using proceeds of a new $1.5 billion issuance, however, fell short of its $1 billion target after bondholders agreed to sell $628.4 million (Sh81 billion) worth of notes in the tender, leaving the balance of $371.56 million in issue.
For the Treasury, the recent decline in interest rates offers an opportunity to refinance the two bonds at a cheaper rate, based on the yields in the secondary market.
At the end of last week, Kenyan Eurobonds in the London and Irish stock exchanges traded at yields of between 6.12 percent and 8.69 percent, for tenors of between two and 22 years.
These yields are indicative of the rates that investors would demand to lend to the government in new issuances for a particular tenor.
The government is also hoping that the recent sovereign credit rating upgrade by the US agency Moody’s will soften the market further for Kenyan debt issuances, potentially allowing it to secure a cheaper rate for the new bond that is being issued to finance the buyback.
Moody’s raised Kenya’s long-term foreign currency sovereign credit rating to “B3” from “Caa1”, citing lower near term default risk due to lower interest rates, higher official forex reserves and a stable shilling.
These ratings are a key consideration for investors before they commit to lending to a sovereign, with the rating category and outlook influencing the level of interest rate they place on such debt.
