Timing The Market: Oil Price Slump Perfect For Kenya’s Second Eurobond Issuance

Timing The Market: Oil Price Slump Perfect For Kenya’s Second Eurobond Issuance

Kenya expects to issue it second Eurobond at much lower than larger African economies that rely on oil export, the East Africa’s minister of finance told Bloomberg.

Henry Rotich, together with other senior government officials, took a non-deal roadshow in April to meet investors in the US and UK to gauge their sentiment on a planned 15- and 20-year Eurobond to be issued later this year.

The East Africa’s largest economy is looking for funds to fill a 9.3 percent budget deficit, but is seeking to raise debt at below double digit interest rates.

“It’s a whole issue of timing,” Rotich told Bloomberg.

“If an opportunity presents itself and there is perfect stability, there are chances of us getting a good deal in terms of yields and tenure and amounts.”

Kenya, a net oil importer, has benefited from a plunge in global crude prices and wants to take advantage of this to tap the Eurobond market for the second time in about two years.

In June 2014, the country raised $2 billion in a Eurobonds with 5- and 10- year maturities that as used to repay a $600 million syndicated loan and the rest on development infrastructure projects such as roads, rural electrification and health projects.

There have been allegation by member of the opposition that about $1 billion of the debut Eurobond was misappropriated.

Debt Eurobond

US investors bought about two thirds of the first Eurobond issue, while British investors bought about a quarter, BBC reported.

The International Monetary Fund (IMF) warned that Kenya might get higher yields when it returns to the international debt market due to its huge budget deficit.

Rotich said in January that he was also exploring other ways to raise money including Islamic financing, a soft loan from the China Development Bank, export credit arrangements and a possible Samurai bond.

Kenya could become the first African nation to tap the international debt markets this year in the midst of a slowdown in sovereign issues from the continent as commodity prices remain subdued and local currencies weak.

Sub-Saharan Africa bond sale boomed before the global commodities price rout started in the last quarter of 2014, but declined in 2015 when several economies in the region came to the brink of crisis.

A muted bounce back in oil and metal prices could however offer some support.