CBK Floats 19-year Infrastructure Bond Worth KSh 75 Billion for February

The Central Bank of Kenya (CBK) is offering a 19-year infrastructure bond (IFB1/2022/19) seeking to raise Kshs 75.0 billion to fund infrastructure projects in the 2021/2022 budget estimates.

The coupon rate will be market-determined. The sale period is between 31st January 2022 to 15th February 2022 and the payment date of 21st February 2022.

Bidders are to invest a minimum of KSh 100,000 while the redemption date is 28th January 2041.

According to Kenya’s 2021/22 budget estimates, the Infrastructure, Energy & ICT sector has been allocated KSh 332.86 Billion.
Priority projects in the budget include construction of Roads and Bridges which has been allocated KSh 94.65 Billion, Rehabilitation of Roads KSh 3.20 Billion, Maintenance of Roads KSh 54.08 Billion, Rail Development KSh 27.16 Billion, Dongo-Kundu Special Economic Zone KSh 8.25 Billion, Mombasa Port Development Project KSh 7.50 Billion.

Other projects are LAPSSET Project KSh 4.46 Billion, Delivery of Affordable and Social Housing Units KSh1.70 Billion, Kenya Mortgage Refinance Company (KMRC) KSh 11.50 Billion, Last Mile Electricity KSh 6.47 Billion, Electrification of public facilities KSh 6.18 Billion, Kenya electricity modernization project KSh 5.72 Billion, Horizontal Infrastructure Phase I (Konza Technopolis project (EPCF) KSh 12.00 Billion and Konza Data Centre & Smart City Facilities KSh 5.20 Billion.

February Primary Bond Likely to be Oversubscribed 

The government is 8.5% ahead of its prorated borrowing target of Kshs 392.6 billion having borrowed Kshs 426.1 billion of the Kshs 658.5 billion borrowing targets for the FY’2021/2022.

“Given the ample liquidity in the market evidenced by January’s average interbank rate declining to 4.5%, from 5.1% recorded in December, as well as the attractive tax-free nature of the infrastructure bond, we anticipate an oversubscription and a higher acceptance rate. Our recommended bidding range for the bond is 12.4%-12.5% within which bonds of a similar tenor are trading,” Cytonn Investments Analysts project.

“We see high subscription levels based on historical performance, coupled with the tax fee nature of the bond,” Genghis Capital Analysts note.

However, they note it will be dependent on the prevailing market liquidity prior to the bond auction.

In addition, they estimate net domestic borrowing at Ksh 414.8 billion (63.0 per cent of the FY 21.22 target.