The Central Bank of Kenya (CBK) received bids worth KSh 88.9 billion from the KSh 50 billion, 6.5-year Infrastructure Bond, an oversubscription of 177.8%, and accepted bids amounting to KSh 67.1 billion.
The CBK accepted competitive bids worth KSh 34.3 billion and KSh 32.8 billion in non-competitive bids and offered successful bidders a coupon rate of 17.9%. Proceeds from the infrastructure bond sale will be used for net borrowing and or net repayments.
In Kenya’s 2023/24 Budget, allocation to infrastructure remains the highest taking 63.0% of the development expenditure. Infrastructure expenditure is set to increase by 12.4% to KSh 468.2 billion, from KSh 416.4 billion in the 2022/2023 financial year, in line with the government’s agenda of increasing the development of critical infrastructure in the road, rail, energy, and water sectors.
The purpose of this 6.5-year infrastructure bond is to fund infrastructure projects in the 2023/24 budget estimates. The Bond has been on sale between 20th October 2023 and 8th November 2023 and has a payment date of 13th November 2023.
- The due date of the infrastructure bond will be on 6th April 2030.
- The redemption structure includes 50% amortization of the outstanding principal amount on 10th May 2027, 30% of the principal amount on 7th May 2029, and final redemption of 100% on all outstanding amounts on 6th May 2030.
Non –competitive bids have a maximum of KSh 50 million per CDS account per tenor. This does not, however, apply to State Corporations, Public Universities, and Semi-Autonomous Government Agencies.
The November 2023 Infrastructure bond prospectus shows that any amounts up to KSh 1.0 million per CDS account at amortization will be redeemed in full except for encumbered securities.
- Infrastructure bonds are used by the Government for specified infrastructure projects. These bonds typically see a lot of market interest because returns from them are tax-exempt.
- Zero coupon bonds are similar to Treasury bills, in that they are sold at a discount and do not have interest payments.