The Central Bank of Kenya (CBK), the Government’s fiscal agent, has invited bids for a KSh 50 Billion 16-year Infrastructure bond whose purpose is to fund infrastructure projects in the 2020/21 budget estimates.
Priority projects
On the list of priority allocations made in the 2020/21 budget includes KSh 18.1 billion for SGR Phase II (Nairobi- Naivasha); KSh 6.0 billion for the LAPSSET Project; KSh 5.0 billion for the Mombasa Port Development Project and KSh 328 million for insurance of ferries for the Likoni channel.
The Government has relied on infrastructure bonds to raise funds needed to fund big-ticket projects in the country through the domestic money market
CBK requires investors to submit their bids for the KSh 50 Billion infrastructure bond, at a minimum of KSh 100,000, whose sale closes on 19th January 2021. This Bond has a value date of 25th January 2021 when successful bidders are supposed to make their payments to the CBK. Bids for the 16-year infrastructure bond close by 2 pm on Tuesday 19th January 2021.
Investors will receive the first Interest payment on this infrastructure bond on 26th July 2021 and every six months till 5th January 2037 as the final redemption of all outstanding amounts. This Bond will be Tax-free as is the case for Infrastructure Bonds as provided for under the Income Tax act.
Central Bank Prospectus
According to the prospectus issued by CBK, placing agents for this Bond include Commercial Banks, Non-Bank Financial Institutions, Licensed Stock Brokers and Licensed Investment Advisors.
Non-Competitive Bids are at a maximum of KSh 20 Million per CDS account per tenor. This excludes to State Corporations, Public universities and Semi-Autonomous Government Agencies (SAGAS).
CBK is advising investors to obtain details of amounts payable for successful bids from Central Bank of Kenya on 21/01/2021 for the 16-year Infrastructure Bond.
Placing agents
Licensed placing agents will be paid a commission at the rate of 0.15% of actual sales (at cost ) net of 5% withholding tax.
The CBK will rediscount the bonds as a last resort at 3% above the prevailing market yield or coupon rate whichever is higher, upon written confirmation from the Nairobi Securities Exchange (NSE).
The Bond qualifies for the statutory liquidity ratio requirements for Commercial Banks and Non-Bank Financial Institutions as stipulated in the Banking Act CAP 488 of Kenya’s Laws. The infrastructure bond will be listed on the Nairobi Securities Exchange and may be re-opened at a future date.
Secondary trading
Secondary trading in multiples of KSh 50,000.00 will commence on 26th January 2021 for this infrastructure bond.
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