Central Bank of Kenya Raises Ksh 81Bn in 16-Year Infrastructure Bond

Central Bank of Kenya Raises Ksh 81Bn in 16-Year Infrastructure Bond, an oversubscription of 250.7%

Ongoing construction of The Nairobi Expressway under construction.

The Central Bank of Kenya has raised Ksh 81 billion in its 16-Year Infrastructure Bond issue against a Ksh 50 billion target.

This is the second bond issue in 2021.

According to CBK, it received bids worth Ksh 125.3 billion (250.7%). Market analysts say that the offer was oversubscribed.

“We attribute the oversubscription to the bond’s tax-free nature and favorable tenor of 12.5 years (amortized), as well as high market liquidity with the flight of capital from the equities market,” Sterling Capital Research said in its note.

“We also believe that a significant proportion of the subscriptions were from foreign investors who have a strong preference for Kenya IFBs.”

Stephanie Kimani, a financial economist noted that the pricing was within expectations with the weighted average rate of accepted bids recorded at 12.257%.

“The above target absorption of bids, around Ksh 31 billion more than intended, suggests that the government’s appetite for debt remains healthy,” she said adding that “The government is (somewhat) sensitive to the cost of its debt accumulation. The market-weighted average rate of all bids received was 12.407% but the average rate of accepted bids was 12.257%.”

The Bond has a value date of 25th 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.

According to Sterling Capital Research, Kenya’s debt service in January is Ksh 174.7 billion, a 137.3% increase over debt service in December 2020. This comprises of  Ksh 128.8 billion in T-Bills, Ksh 31.1 billion in T-Bonds and Ksh 14.8 billion in coupon payments.

Currently, the county has been granted a six-month debt repayment holidays from Paris Club creditors and China.

“At the same time, the respite from debt restructuring could ease borrowing pressure although the sovereign’s appetite for local debt may not fundamentally change,” notes NCBA Research in its Weekly Fixed Income Report – 19th January 2021.