Ivory Coast’s Eurobond saw a subscription of over $8 billion (Sh1.2 trillion) from more than 400 investors. PHOTO | SHUTTERSTOC By KEPHA MUIRURI
Last week’s new Eurobond sale by the Cote d'Ivoire has rekindled hopes of Kenya’s successful return to the international capital markets.
The issuance, which is a first by an African country in two years, has signalled renewed investor appetite for the sovereign debt of emerging and frontier economies.
Cote d'Ivoire’s Eurobond saw a subscription of over $8 billion (Sh1.2 trillion) from more than 400 investors as the country successfully raised $2.6 billion (Sh420 billion) through two bonds with tenures of eight and 13 years respectively, at single digit interest rates.
Analysts see the bond sale as a marker of rising confidence in African countries’ sovereign debt, reversing previous heightened risk aversion that froze such fundraising.
For Kenya, the events come amid its expected redemption of its 2014 debut $2 billion (Sh323 billion) Eurobond in June this year.
While Kenya has already lined up alternatives to issuing a new Eurobond to meet the redemption, the country could push through a new issuance to pay the debt.
Ms Razia Khan, the Managing Director and Chief Economist for Africa and the Middle East at Standard Chartered PLC sees the window for Kenya to return to the Eurobond market opening in the second half of the year when she expects risks perceptions towards the country would subside.
Read: Treasury finalising list of new Eurobond arrangers
“Once the Eurobond maturity is successfully repaid, and we see actual G3 easing (interest rate cuts in advanced economies), risk perceptions towards Kenya are likely to moderate further. Eurobond yields should compress materially by H2-2024/H1-2025, and that might be a better time for Kenya to consider external issuance to refinance future debt maturities,” she said.
“Given the strength of international financial institutions' support, Kenya can afford to wait until market conditions might be more favourable.”
Kenya is widely expected to draw on its forex reserves, enhanced by recent funding from multilateral lenders, to repay the Eurobond maturity as yields on its previously issued Eurobonds remain high.
The expectations of an early return to the international capital markets may have been partly watered down by a push back by major central banks against immediate interest rate cuts which would spur a quicker turnaround of foreign portfolio inflows back into emerging and frontier economies.
Urgent balance
Earlier this month, the International Monetary Fund (IMF) indicated it did not expect Kenya to refinance the June maturity through a new bond issuance, hence its move to provide the country with additional funding.
“Urgent balance of payments needs have emerged, primarily due to the US$2 billion Eurobond maturing in June 2024 as prior expectations of a full rollover via a bond issuance at a reasonable cost is unlikely to materialise under the prevailing global bond market conditions,” the IMF indicated.
Jitters surrounding the June 2024 maturity have been a cause for concern by investors as mirrored by high yields (falling prices) of outstanding Eurobonds.
The concerns were exacerbated by a failed move last year to buy back part of the Eurobond holders with the review of reducing the liability in June.
The National Treasury is engaging lead managers, Citi and Standard Bank with the view to smoothly handle the debt repayment.
The exchequer did not respond to this publication's queries on whether it would make a stab at returning to the Eurobond market.
Read: Treasury settles Sh10.8bn interest on maturing Eurobond
In December, however, the planning ministry ruled out any buybacks, stating it expected the maturity to be settled alongside the last coupon/interest payment in June.
“The final interest payment on this Eurobond is scheduled for the last week of June 2024, alongside the repayment of the principal amount of $2 billion,” Treasury Cabinet Secretary Njuguna Ndung’u said.
→kmuiruri@ke.nationmedia.com
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