Kenya to Refinance $2 Billion Eurobond Due 2024 by End-June

NAIROBI (Capital Markets in Africa) — Kenya plans to take advantage of lower sovereign yields in the international bond markets to refinance a 10-year $2 billion Eurobond by the end of June.

The measure is “part of proactive debt management to improve debt sustainability liquidity indicators,” such as the debt service-to-revenue and external debt service-to-export ratio, over the medium term, the National Treasury said in an emailed response to questions.

The refinancing of the securities due in 2024 comes amid separate plans by the East African nation to raise 123.8 billion shillings ($1.13 billion) from foreign sovereign bonds in the next four months and another 124.3 billion shillings in the coming fiscal year to help finance its budget.

The shape and form of the re-financing is being evaluated and will be communicated in time, the Treasury said.

Yields on Kenya’s 10-year Eurobonds due in 2024 dropped 12 basis points by 3:15 p.m. in Nairobi to 3.577% from 3.697% at the close of Wednesday’s trade, according to data compiled by Bloomberg.

Favorable Markets
Given that three credit rating firms have Kenya on a negative outlook, authorities could be looking to refinance its external debt while markets are favorable, potentially “before further credit rating downgrades,” said Jacques Nel, head of Africa macro at NKC African Economics, in an emailed response to questions. The nation’s recent re-engagement with the International Monetary Fund is a positive sign, and could be the “excuse” investors desire to place further bets on Kenya, he said.

“It does look like it is a good time to take advantage of this hunt for yield in the context of rather frothy looking developed markets by refinancing external debt,” Nel said.

Earlier this week, the IMF reached a staff-level agreement with Kenya for a $2.4 billion loan to partly support the country’s response to the coronavirus.

Kenya also has plans to refinance syndicated loans amounting to 351 billion shillings in the fiscal year beginning July, the Treasury said.

East Africa’s biggest economy’s public debt stood at 7.28 trillion shillings by the end of December, equivalent to 65.6% of the gross domestic product in nominal terms, according to government data. The Treasury wants the statutory debt ceiling lifted above 9 trillion shillings to accommodate anticipated fiscal deficits from 2021-22.

Source: Bloomberg Business News