Kenya plans to float a sovereign bond worth at least $15 billion in the coming financial year to partly offset maturing international obligations and budgetary support.
A National Treasury official who sought anonymity due to the sensitivity of the matter told the Star that the amount to be floated in the country's fifth Eurobond could rise depending on circumstances.
"As you are aware, we have invited bids for lead managers to guide the process. We are looking at a figure of $1.5 billion or more depending on circumstances. Full details will be released in due course,'' said the official.
On Tuesday, the exchequer said it needed a consultant who will engage with a wide range of investors from North America, Europe, the Middle East and Asia.
"Bidders are expected to submit applications by April 28,'' National Treasury said in a public notice.
His sentiments seem to be in sync with those of Haron Sirima, the director general Public Debt Management who recently told Reuters that Kenya may opt to issue a Eurobond with a different tenor to manage the maturity of a $2 billion (Sh270 billion), 10-year bond this year in tranches.
“There is a likelihood that we may issue an instrument that is not of the same tenor. It will be structured in two or three tranches, depending on the advice received from bankers,'' Sirma said.
Kenya is expected to make the bullet payment to retire the 10-year sovereign bond whose issuance in 2014 signaled the Jubilee administration’s turn to commercial debt to fund the budget.
The country took $2.75 billion (Sh346 billion at yesterday's rate) in two tranches consisting of a 10-year paper and a five-year issuance ($750 million), at interest rates of 6.78 per cent and 5.87 percent respectively.
The five-year paper was repaid partly using the proceeds of another $2.1 billion Eurobond issued in May 2019.
Last year, the country was forced to shelve plans to float a sovereign bond after the Russia-Ukraine war caused yields to surge on international markets.
The former exchequer chief Ukur Yatani told journalists in June last year that the government had opted to borrow from commercial banks after the crisis in the international market doubled the yield on sovereign bonds to 12 per cent.
Kenya's last foray into the market was two years ago when it sold a $1 billion Eurobond that received orders just short of $6 billion.
"Last year we borrowed at six per cent and now it stands over 12 per cent. This is no longer feasible. That's why we're still exploring options to look at a number of banks that can advance us the money at a cheaper rate," Yatani said.
Last week, yields on Kenya’s Eurobonds increased by an average of 24.4 basis points to trade in the regions of 11 per cent, with 2024 maturity increasing by 46.1 basis points. The yield on the 10-Year Eurobond for Angola declined while that for Ghana increased.
An economist Dan Omenda says Kenya should expect a higher rate for the upcoming sovereign bond, at least 10 per cent considering its poor ratings by Fitch, Moody's and S&P.
"All these international rating firms have since cut Kenya's debt outlook from stable to negative on concerns about the country’s debt servicing capacity. This is expected to be worsened by volatilities in the global financial market,'' he said.
Apart from the planned Eurobond, Kenya is expecting a number of international loans before the close of this financial year.
Addressing media during the latest post-Monetary Policy Committee (MPC) meeting, Central Bank of Kenya (CBK) Governor Patrick Njoroge hinted that Kenya expects to receive at least $1.2 billion (Sh162 billion) between April and May this year.
At least $250 million (Sh33.7 billion) is expected this month from syndicated loans, while $ 1 billion (Sh135 billion) is expected from the World Bank in May for budgetary support.