Kenya Govt Asks Banks to Submit Sh 206 Billion Eurobond Proposal

The Kenyan Government has asked banks to submit proposals to arrange a Sh 206 Billion ($2 Billion) eurobond issue according to reports by Bloomberg.

The proposals for the bond are to be submitted to the National Treasury by 29th November 2017 according to the sources who declined to be named because the information is private. The proposals must indicate the ‘costs of either a five- to 10-year issue to be repaid in bullet form, or 12- to 15-year securities amortizing in the final three years.’

Bloomberg further reports that the government will begin a roadshow in January next year with plans to float the bond in the first quarter of 2018.

Country’s 2nd Eurobond Issue

This will be the second Eurobond issuance by the Kenyan Government and comes amid a controversy about the country’s debut issue in 2014 which is maturing in June 2024. In the first issuance in June 2014, the Govt raised $ 2 Billion (Amounted to Sh 174 billion at the Ex. rate of Sh 87). In December of the same year, the government then raised a further $750 Million (Amounted to Sh 67.8 Billion at Ex. Rate of Sh 90) through a tap sale of the existing $2 Billion eurobond. Under a tap, an existing transaction is reopened for subscription, using the same documentation as before.

Concerns

However, concerns have been raised by the opposition and the media that the government did not fully account for the proceeds received from the 2014 and the Tap sales issued in December, 2014.

Proceeds From the upcoming Issuance

Proceeds from the second issue are expected to go towards the purposes of general budgetary support including funding of major infrastructure projects and for the repayment of a Syndicated Loan amounting to Sh 77 Billion which was taken in 2015 and was due in October this year plus the accrued interest. The government is also expected to pay some “fine” after it requested the creditors to extend the repayment by six months to April 2018, when it expects to have received the proceeds of the issue.

Criticism from IMF & Moody’s

The news about the Government’s move to go to the international markets comes at a time when the International Monetary Fund (IMF) and credit rating agency Moody’s have warned that the country’s rising debt levels in a very short span could lead to weakness in the economy from unanticipated shocks.

Most recently, Moody’s placed the B1 long-term issuer rating of Kenya on review for downgrade citing the Govt’s rising debt burden.

In response, Kenya’s Cabinet Secretary for Treasury Henry Rotich dismissed Moody’s review as ‘desk analysis’ adding that the agency was just doing freelance rating, according to the Business Daily.