The government of Kenya through the Ministry of Treasury on Thursday announced plans to float a Ksh70 billion infrastructure bond to fund development projects pencilled for the financial year 2023/24.
In a notice by the Central Bank of Kenya (CBK), the government announced the auction of infrastructure bonds worth Ksh70 billion ($429 million) with a tenor of 8 and a half years and with the annual interest rate of the bond set to be determined by the market.
According to CBK, the auction will last for a period of three weeks, from January 24 to February 14, 2024. The bond is set to pay interest twice a year, starting in August this year.
"The Bond will be tax-free as is the case for Infrastructure Bonds as provided for under the Income Tax Act," CBK noted.
In its statement, CBK disclosed the redemption structure will involve repayment of 20 per cent of the principal by February 15, 2027, with the unencumbered outstanding principal amount repaid by August 9, 2032.
"Any amounts up to Ksh 1.0 million per CSD account at amortisation will be redeemed in full," CBK revealed.
"Pledge contracts that have not been cancelled 5 days before the amortisation date, will be cancelled automatically at CBK. Thereafter the pledged holdings will be transferred to the lender and the amortization cash amount paid to the lender."
With the Central Bank of Kenya as the paying agent, the placing agents or the intermediaries in the deal include Commercial Banks, Non-Bank Financial Institutions, Licensed Stock Brokers and Licensed Investment Advisors.
"Licensed placing agents will be paid a commission at the rate of 0.15% of actual sales (at cost) net of 5% withholding tax," read part of a statement by CBK.
The bond will be listed on the Nairobi Securities Exchange and will only be eligible for investors with active central securities depository (CSD) accounts with the Central Bank of Kenya.
However, the govt warned that defaulters may be suspended from subsequent investment in the government securities.
The Govt has so far raised Ksh397 billion shillings through the sale of infrastructure bonds since January 2023 to fund projects ranging from road construction to water supply.
