Four banks have been Chosen as Lead arrangers for a new Eurobond

In an effort to relieve some of the pressure associated with paying the $2.0 billion (Sh277.6 billion) Eurobond due next year, the government has shortlisted four banks as potential lead arrangers for Kenya’s planned return to the international financial markets between July and June 2024.

According to information provided to The Business Daily, Citigroup, JP Morgan, Standard Bank, and Standard Chartered Bank have made the short list for the anticipated issuance.

According to two sources with knowledge of the situation, the Treasury published a request for expressions of interest for international lead managers for the issuance of a sovereign bond on April 18. This marked the beginning of the lead arranger selection process.

Kenya raised $1.0 billion through Eurobonds in June 2021, with Citigroup and JP Morgan serving as joint-lead managers and NCBA and I&M banks serving as co-lead managers.

The government had planned to issue yet another Eurobond during the current fiscal year, but it decided to scrap the idea because of the challenging global economic climate, which caused the yield to rise and made the plan unprofitable from a pricing perspective.

Chris Kiptoo, the principal secretary of the Treasury, stated on May 31, 2023, that the government was well along in the process of choosing lead arrangers for the Eurobond that would be issued the following fiscal year.

The issuance has been chosen as one of the methods the government can use to settle the maturing bond that was offered ten years ago.

“The National Treasury is at an advanced stage of procuring lead managers to provide advisory services in the next few weeks. In the meantime, the government will meet all other external debt service payments due through revenues and refinancing,” Dr Kiptoo told members of the National Assembly Budget and Appropriations Committee on May 31.

The Treasury has set aside Sh241.8 billion for the redemption of the maturing Eurobond, which will make up 50.8% of all redemptions of external debt for the upcoming fiscal year, according to the draft budget estimates for 2023–2024.

The Exim Bank of China, with external redemptions of Sh88.9 billion for the upcoming fiscal year, is far behind.

“A Eurobond worth $2.0 billion which is approximately Sh241.8 billion will be maturing on June 24th, 2024. To settle this Eurobond at maturity at minimum cost, the government is considering several options, including liability management operations including alternative financing solutions to settle maturities; undertake buy backs which means tender offered through open market operations or a bond switch exchange with different longer tenured bonds,” the PS said.

The planned re-entry of Kenya into international markets comes at a time when the nation has benefited greatly from concessional financing, including Sh138.0 billion ($1.0 billion) in budget support financing from the World Bank’s Development Policy Operation (DPO) window and enhanced financing from the IMF after the conclusion of the fifth review earlier in May.

Concerns about the government’s capacity to fulfil the obligations of the Eurobond, which mature in June 2024, have repeatedly been dismissed by the government.

“On the upcoming 2024 Eurobond maturity, the government has received over 300 proposals offering various liability management solutions, as it embarks on effective liability management in the next fiscal year. The new administration is committed to managing public debt effectively and minimise any risks of default at all times”, Treasury CS Njuguna Ndung’u said in a statement.

The Kenya Kwanza government plans to finance its ambitious Sh3.6 trillion budget, so the Treasury projects that borrowing for 2023–2024 will total Sh720.1 billion, of which external borrowing is expected to raise Sh198.6 billion.