Kenya raises Sh210bn in third Eurobond loan issue

Kenya has finally floated its planned third Eurobond issue, raising Sh210 billion ($2.1 billion) in two tranches of seven and 12 years.

Treasury CS Henry Rotich said in a notice on Thursday that Kenya will pay interest at seven percent for the seven-year tranche and eight percent for the 12-year paper, although he did not disclose the split of the debt between the two tenors.

The bond was arranged by JPMorgan and Standard Chartered, and will be listed on the Irish Stock Exchange.

A significant part of the money raised will go towards refinancing maturing debt, he said, with the rest meant to fill part of the budget deficit of Sh635.5 billion for the 2018/19 fiscal year.

“The proceeds from this issuance will be used to finance some of the development infrastructure projects, the general budgetary expenditure (in accordance with the applicable legal requirements) and to refinance part or all of the obligations outstanding under the $750 million (Sh 75 billion-2014 Eurobond) due on June 24, 2019 and potentially part of the other debt obligations,” said Mr Rotich in the notice.

Kenya’s budget sets out external borrowing for the current fiscal year at Sh321 billion, part of which had already been met before Wednesday’s Eurobond sale through bilateral loans and syndicated debt.

This is Kenya’s third Eurobond. The country sold its debut $2.75 billion (Sh275 billion) bond in June 2014 that was made in two tranches of five years (Sh75 billion) and 10-years (Sh2billion).

In February last year, The Treasury floated its second bond, raising $2 billion (Sh200 billion) in two equal tranches of Sh100 billion in 10 and 30-year tenors.

The latest sale is however likely to raise afresh the debate about Kenya’s ballooning public debt and the cost of servicing the repayment obligations.

Interest payments on both domestic and external debt stand at Sh386 billion in the current fiscal year, rising to Sh426.2 billion in 2019/20.

The country has also to raise in excess of Sh1 trillion to roll over maturities both domestically and for external loans.