Treasury shops for lead manager for new Eurobond


National Treasury and Economic planning CS Prof Njuguna Ndung’u on February 13, 2023. PHOTO | LUCY WANJIRU | NMG

The National Treasury is shopping for a lead manager to help it underwrite its next sovereign bond amidst limited and tight liquidity that compelled Kenya to cancel a Sh115 billon Eurobond in 2022.

Kenya has been forced to reconsider and return to the international capital market to raise money to help it retire a $2 billion (Sh271 billion) Eurobond maturing next year.   

In an advert on Tuesday, Treasury requested an expression of interest from reputable financial institutions licensed to operate in North America, Europe and the Middle East to provide lead management services.

The lead manager’s crucial role will be to advise Treasury on the appropriate timing of the Eurobond as yields have lately been elevated, forcing many emerging and frontier countries to stay away from the international capital market.

The lead manager will also be expected to help the Treasury issue and list sovereign or government bonds of more than seven years.

“The lead manager services shall include…advising the National Treasury in determining the appropriate timing, format, amount, tenor, coupon, all-in-cost, and other relevant terms and conditions for the issuance of the international bond,” said Treasury.

They will also advise the Treasury on the optimal liability management strategy for Kenya’s outstanding Eurobonds, including the one maturing next year.

In its last cancelled Eurobond issue, Kenya had tapped the services of Citi and JP Morgan as joint book-runners.

Although the current administration of President William Ruto had stated that it intends to stay away from expensive dollar-denominated loans, a shortage of dollars to repay other maturing Eurobonds has left it with no option but to return to the global financial market to roll over these loans.

“The government will maintain its presence in the international financial markets through refinancing the existing commercial maturities and may consider liability management operations ahead of scheduled maturities if the international debt capital market condition improves,” said Treasury in its 2023 Medium Term Debt Management Strategy.

Yields on Kenya’s Eurobonds increased by an average of 24.4 basis points, with 2024 maturity increasing by 46.1 basis points. A yield rise means investors expect higher interest rates and are selling their bonds.

The International Monetary Fund (IMF), in its latest review of the sub-Saharan African economies, notes that in the next two years alone, a sizable share of outstanding Eurobond debt will come due —about $6 billion in 2024 and another $7 billion in 2025.

“If countries struggle to make repayments or rollover debt, it could have potential repercussions on the region’s economic growth and social development,” said the IMF.

This year loan repayment pressures will mostly emanate from the maturity of domestic debt -- the short-term government securities, said Treasury.

However, Treasury added the repayment structure is relatively smooth except for spikes in 2023, 2024 and 2028 due to the maturities of international sovereign bonds.

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