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Kenya’s Eurobond debt rises to Sh1.4trn after new issuance
The National Treasury undertook the first buyback in February 2024, repurchasing Sh193.5 billion ($1.5 billion) to partially refinance Kenya’s debut Sh258 billion ($2 billion) Eurobond from 2014, which was set to mature in June of the same year.
The stock of outstanding Kenyan Eurobonds has grown by Sh236 billion after the country’s latest issuance, revealing growing liabilities from sovereign bonds even as the National Treasury emphasizes focus on cheaper financing.
Kenya’s total Eurobonds rose from Sh1.132 trillion ($8.78 billion) to a high of Sh1.368 trillion ($10.61 billion) after the sale of a Sh290.2 billion ($2.25 billion) dual-tranche Eurobond last month.
The new issuance includes a Sh116.1 billion ($900 million) paper priced at 7.875 percent, which matures in three equal instalments in 2032, 2033, and 2034.
The second tranche of the Eurobond is a Sh174.1 billion ($1.35 billion) paper which has an 8.7 percent coupon and matures in three equal instalments in 2037, 2038, and 2039.
Proceeds from the new Eurobond helped Kenya repay Sh53.5 billion ($415.35 million) in early redemptions, including Sh11.6 billion ($90.51 million) on sovereign notes maturing in 2028 and Sh41.9 billion ($325 million) notes due in 2032.
The buyback, however, underperformed its target of $500 million (Sh64.5 billion) by Sh10.9 billion ($84.49 million).
Kenya raised Sh290.2 billion ($2.25 billion) despite only requiring less than one-fifth of the amount to finance the buyback, but indicated that it would utilize the balance on other budget requirements.
“Any remaining proceeds will support budgetary needs,” John Mbadi, the National Treasury Cabinet Secretary, said in a statement on February 20.
“This issuance aligns with the government’s strategy to smoothen the maturity profile of Kenya’s external debt and proactively manage public debt liabilities. It also reflects improving investor confidence, following Moody’s recent upgrade of Kenya’s sovereign rating to B3 from Caa1 and revision of the outlook to stable on account of reduced default risks, stronger foreign-exchange reserves, and a narrower current account deficit.”
Kenya has reduced near-term Eurobond obligations through the buyback, including lowering redemptions set for 2028 and 2032, but pushes out higher payouts into the long term.
The National Treasury noted that it would mostly target new Eurobonds for early redemptions of previously issued notes, but it has largely combined the operations termed technically as liability management with new commercial borrowing.
“The external borrowing will be majorly through concessional loans from multilateral, bilateral, and limited commercial loans such as syndicated loans and international bond issuances,” the National Treasury said in its latest medium-term debt management strategy for the financial years up to June 2029.
February’s Eurobond buyback was the fourth in the last two years and is part of a wider refinancing plan aimed at lengthening the maturity profile of Kenya’s public debt to ease the repayment pressure.
The National Treasury undertook the first buyback in February 2024, repurchasing Sh193.5 billion ($1.5 billion) to partially refinance Kenya’s debut Sh258 billion ($2 billion) Eurobond from 2014, which was set to mature in June of the same year.
The exercise served to calm markets, which had become doubtful of the government’s ability to retire the debt amid a dollar shortage at the time.
Kenya issued a new Sh193.5 billion ($1.5 billion) Eurobond, priced at 9.75 percent, and which matures in 2031 to facilitate the buyback.
Two other buybacks last year targeted maturities in 2027 and 2028, respectively.
