Treasury sets end month for sale of Sh172bn Eurobond

IMF managing director Christine Lagarde (left) with Treasury Cabinet Secretary Henry Rotich at the Treasury Building in Nairobi January 6, 2014. Photo/Billy Mutai  Nation Media Group

By GEOFFREY IRUNGU

In Summary

• Mr Rotich said preparation of a prospectus for the bond issuance is ongoing, but he could not disclose more details due to regulatory limitations on issuers of securities.
• Besides financing projects, the loan is also expected to shore up Central Bank of Kenya’s foreign exchange reserves that currently stand at about $6 billion, amounting to 4.2 months of imports against the East African Community monetary union target of 4.5 months cover.

The planned sale of a multi-billion-shilling Eurobond is set to start at the end of this month or early next month, Treasury secretary Henry Rotich has said.

Cash raised from the bond, expected to be between Sh130 billion and Sh172 billion ($1.5-$2 billion), will be used to partly plug a Sh230 billion national budget deficit and also retire a $600 million syndicated loan borrowed from global banks in 2012.

Mr Rotich said preparation of a prospectus for the bond issuance is ongoing, but he could not disclose more details due to regulatory limitations on issuers of securities.

“We are in the process of preparing and completing key documents and the offering circular on the sovereign bond is about to be launched. By the end of this month or early next month we will begin selling the bond,” he said.

An offering circular is a summary prospectus for a new security and is normally delivered to individuals and brokerage houses in order to arouse interest from potential investors without them having to labour through the long-form prospectus.

Mr Rotich spoke during a joint press conference with International Monetary Fund (IMF) managing director Christine Lagarde at the Serena Hotel in Nairobi on Tuesday evening.

Besides financing projects, the loan is also expected to shore up Central Bank of Kenya’s foreign exchange reserves that currently stand at about $6 billion, amounting to 4.2 months of imports against the East African Community monetary union target of 4.5 months cover.

Mr Rotich and President Uhuru Kenyatta have made requests for balance of payment support from the IMF.

The president told the visiting IMF head in Mombasa on Tuesday that Kenya was still vulnerable to future shocks and needed an insurance-like facility from the institution.

“We remain vulnerable to future shocks and we must be able to effectively deal with them if and when they arise,” said President Kenyatta.

READ: Kenya seeks IMF support as economic shocks loom

The president wanted the new facility to be a critical element of future partnership. “My country needs an insurance-type facility that can be accessed as and when needed with sufficient resources to effectively deal with potential shocks,” he said.

The President said the IMF had been a good partner in its ties with Kenya, and noted that Ms Lagarde’s style had been “considerate and inclusive”.

In her address on Wednesday, Ms Lagarde said Kenya had remained faithful to the IMF programme in the past few years and should not be allowed to face exposure to shocks.

“I congratulated President Kenyatta and his colleagues for the remarkable progress made over the last few years. Kenya’s economic conditions have continued to improve thanks to a far-reaching reform agenda,” said Ms Lagarde.