Kenya has secured a new Ksh193 billion ($1.5B) Eurobond deal, it has now emerged.
The deal, conducted by two banks on behalf of the National Treasury, saw Kenya receive billions of shillings in addition to securing a $579 million buyback of Kenya’s existing Eurobond that matures in 2027.
This means that instead of waiting until 2027 to repay the entire bond, Kenya prepaid $579 million (Ksh74.8B) of it by offering current bondholders the chance to sell back their bonds early.
The new Eurobond will mature in 2036 and has a ten-year weighted average life, as the principal will amortize in equal instalments during the final three years to maturity.
The new arrangement was seemingly aimed towards prudent debt management as prepaying part of a bond reduces the future repayment burden and can help manage debt levels more sustainably.
According to the two banks, the new loan saw strong demand from investors keen to support Kenya’s strategies to proactively manage its debt. This enabled the government to tighten pricing and upsize the issuance, compared to the initial guidance.
The 2036 Eurobond carries a 9.50 per cent annual coupon rate and was priced at a yield of 9.95 per cent. Meanwhile, the 2027 Eurobond maturing on May 22, 2027, carries a seven per cent annual coupon rate, resulting in semi-annual interest payments to bondholders.
Typically, these payments are made every six months, specifically on May 22 and November 22 each year, until the bond’s maturity.
Historically, Kenya has had three Eurobonds but has so far only repaid one. The first Eurobond was issued in 2014, amounting to Ksh355 billion ($2.75B). Its tenor was a period of five to ten-year tranches.
However, this issue was marred by controversy over a lack of transparency over how the funds were used and alleged misappropriation that sparked investigations by the Auditor General and Parliament.
The Eurobond, which matured last year, was fully repaid in February, four months before its actual maturity.
The second Eurobond was issued in 2018, amounting to $2 billion (Ksh258B). Its structure was in two tranches – 10-year ($1 billion-Ksh 129.2B) and 30-year ($1 billion-Ksh 129.2B) bonds. Their respective yields were set at 7.25 per cent and 8.25 per cent.
The third Eurobond, amounting to $2.1 billion (Ksh 271B), was issued in 2019. Its structure was in two tranches – 7-year ($900 million- Ksh 116B) and 12-year ($1.2 billion- Ksh 155B). It was issued to refinance maturing debts, especially the 2014 Eurobond.
Cumulatively, Kenya has been issued $8.35 billion (Ksh 1T) since 2014, despite numerous concerns over the country’s debt sustainability and high repayment burden.
