Kenya has announced a roadshow for a dual-tranche Eurobond (12- and 31-year paper) to raise Ksh250 billion for both bonds. The international tour will target investors in Europe and the United States.
The National Treasury has appointed J.P. Morgan and Standard Chartered to lead the new Eurobond issue.
#Kenya looks like it'll be the next African country to do a #Eurobond. It's appointed JPMorgan and StanChart to organise a London and US roadshow starting tomorrow. It's looking at issuing 12- and 31-year dollar tranches. @TheTerminal
— Paul Wallace (@PaulWallace123) May 8, 2019
“Pricing for the bond is still uncertain. However, whereas heightened risk aversion on the back of geopolitical and trade tensions and the absence of the IMF pre-cautionary facility may attract a higher premium, sound domestic economic underpinnings as well as sustained yield search amidst a dovish drift in major central banks’ guidance should be ground for some reasonable pricing,” according to CBA Market Analysts.
“In the near term, the proceeds should curtail appetite for domestic debt taming interest rate expectations. This comes at a time when Treasury has thus far absorbed KES 284.33Bn from the local market, 91% of the fiscal year target. While the near KES 100Bn shortfall in revenues could see some surge in local borrowing, we do not see a follow through by markets through the yield curve.”
Kenya made its international capital markets debut in 2014, issue 10- and 5-year tranches.
It returned for a 10- and 30-year tranches bond in 2018 before starting talks with lenders at the beginning of this year on the issuance of a further KSh250billion (USD2.5 billion) worth of bonds.
Cytonn Investments says a Eurobond is a special type of bond that is issued in a currency other than the issuer-country’s home currency. Since it is issued in a foreign currency and its target investors are foreigners, it is considered one way that a country can raise foreign pubic debt.
Cytonn Investments in its ‘Sub-Saharan Africa (SSA) Eurobonds: 2018 Performance and Effects on Debt Sustainability’, “We expect yields on Ghanaian Eurobonds to decline due to prospects of relative economic and political stability, whereas Kenyan, Nigerian and Senegal Eurobond yields might rise due to potential political risks arising from the looming elections later in the year in Nigeria and Senegal, coupled with volatility in global commodity prices, especially for oil-producing Nigeria. The downgrading of Kenya’s debt distress rating from low to moderate by the IMF would mean investors will expect higher yields on any new debt issued.”
(Comment from Market analysts in Paragraph 2 &3)