Standard Bank Group has acted as joint lead manager and bookrunner for the Republic of Kenya’s $1.5bn Eurobond and joint dealer manager for the concurrent tender offer of $1.4 billion outstanding Eurobonds due to mature in June 2024. The transaction is Kenya’s first since 2021 as the Republic looks to diversify its funding sources and marks a successful return to the capital markets.
The Eurobond, which closed on 16th February, was priced at a yield of 10.375% with a 9.75% coupon. It will mature in 2031 and has a six-year weighted average life as the principal will amortize in equal installments in the final three years to maturity. Proceeds of the Eurobond were used to fund the tender offer for the 2024 Notes, which settled on 21st February 2024.
The Eurobond saw strong demand from investors keen to support Kenya’s strategies to proactively manage its debt. This enabled the Republic of Kenya to tighten pricing and upsize the issuance, compared to initial guidance. The tender offer was highly successful with over 72% participation from investors leaving just over $550m bonds outstanding.
Joshua Oigara, Chief Executive of Stanbic Bank in Kenya and South Sudan, a member of Standard Bank Group, said:
“We are proud to have facilitated this Eurobond for Kenya. The significant demand we saw for the bond reflects the growing confidence in Kenya from investors. We are enthusiastic about the renewed access to capital markets, the overall success of the transaction, and the growth this enables.
“A deep understanding of Kenya’s economy, regulations, and people are at the heart of everything we do at Standard Bank. It is encouraging to see the investor community take note of the opportunity the country represents.”
Standard Bank Eurobond Facilitation And Investor Confidence
Yields on Kenya’s Eurobonds have fallen into single digits after the partial payment of its existing $2bn Eurobond.
The return from other Eurobond issues has marked a similar turn with yields on the seven-year sovereign bond maturing in 2027 hitting a low of 8.611 percent from 11.64 percent over the same period.
Yields on the 10-year Eurobond maturing in 2028, the 12-year bond maturing in 2032 and the 13-year bond maturing in 2034 have similarly fallen to 9.475, 9.939 percent and 9.749 respectively.
According to analysts, the falling yields mirror a risk adjustment on Kenyan sovereign assets in the international capital markets as investor concerns surrounding the ability of the country to meet maturities shrink.
In early February, the National Treasury bought back Ksh205.6 billion ($1.44 billion) notes from the debut 2014 Eurobond following the issuance of a new Eurobond of a similar amount net of lead arranger fees.
The buyback has served to diminish fears around Kenya’s ability to meet the maturity on schedule with the country now expected to clear a reduced, remaining balance of Ksh79.5 billion ($557 million) on June 24.
The buyback has been the first move by Kenya to implement liability management operations following the contracting of Citi and Standard banks as lead managers to oversee the redemption of the 2014 Eurobond.
The exchequer has outlined plans to further leverage liability operations as a debt management tool, especially for external debt.
Debt swaps and buybacks have been identified as part of liability management operations which forms part of the exchequer’s envisioned public debt management reforms.
Beyond Kenyan assets looking more favorable after the buyback, the local exchange rate has seen its fortune turn after the new issuance released fresh dollar inflows in the market.
The inflows have improved the forex liquidity in the market featuring the release of dollars by hoarders, elevating the Kenya Shilling to record gains of nearly two decades against the US dollar last week.
