The Kenya Roads Board (KRB) is set to issue a Sh70 billion tax-free roads bond in the next one week to raise funds for road maintenance, actualising the government’s plan for off-balance sheet financing for the capital intensive exercise.
The roads agency had planned to issue a Sh150 bond this month in its three-year bond plan that is targeting Sh360 billion to fill the deficit existing in the road maintenance bill.
KRB general manager for finance Rashid Mohamed said all the preparations were now complete for the floating of the bond, which is expected to be a major boost for the cash needed to keep the roads in good shape.
The Kenya Roads Board (KRB) is set to issue a Sh70 billion tax-free roads bond in the next one week to raise funds for road maintenance, actualising the government’s plan for off-balance sheet financing for the capital intensive exercise.
The roads agency had planned to issue a Sh150 bond this month in its three-year bond plan that is targeting Sh360 billion to fill the deficit existing in the road maintenance bill.
KRB general manager for finance Rashid Mohamed said all the preparations were now complete for the floating of the bond, which is expected to be a major boost for the cash needed to keep the roads in good shape.
“We completed the market sounding for it and settled on the Sh70 billion for a start. I can’t tell you so much for now but we are all set and we will hit the market soon.
“We got the Central Bank of Kenya to be our lead arranger and the fiscal agent which was a major plus for us,” Mr Mohamed said.
The bond will have a tenor of nine years and is largely expected have an interest rate that is similar to the current rates for the other government papers.
There will also be a green shoe option of Sh10 billion should the appetite exceed the Sh70 billion.
While the bond is mainly targeting local investors, it will also be open to foreign investors, with KRB hoping to market it based on its tax-free status.
The bond plan was revealed in December 2019 after MPs passed the legal framework enabling the floating such debt instruments.
Kenya has been relying on the Sh18 per litre road maintenance levy charged on petrol and diesel to keep the expanding road network in shape.
GROWING DEBT
The levy yields about Sh70 billion per year, but it has proved insufficient with KRB estimating that the country needs at least double that amount to maintain the roads.
The bond will be backed by the Sh65 billion the National Treasury allocates to the agency every year as well as the maintenance levy.
The bond is also expected to offer the National Government an off-balance sheet solution that will not add an extra strain on the ballooning debt load.
The enactment of the Kenya Roads Board Act 2019 last December gave the agency the power to borrow and leverage the Kenya Roads Fund.
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