Kenya Offers Options to Investors in London

Kenya has initiated talks with potential investors in London before deciding on which debt instrument to issue, ranging from a Eurobond to a Shariah-compliant Sukuk, or the Japanese Samurai bonds. 

Sources report that the National Treasury held a meeting on July 7th with bond investors including Kenya diasporans to inform them of the country's intention to settle the $2 billion (Sh282.2 billion) Eurobond coming due in the current financial year. This is in line with President William Ruto's statement about repurchasing half of the debt that was due for maturity in June. This comes weeks after Kenya roll out an electronic-over-the-counter trading platform to enable Kenyans abroad to invest in Kenyan government debt. 

The Treasury has made it clear that they plan to have lead arrangers on board by the end of the month, which will signal to the world Kenya's intention to settle the maturing debt obligations. It has been suggested that the country may issue a multi-tranche Eurobond, meaning that it will involve at least two different tenors when it goes to market later in the year.

The government recently raised $2.75 billion in two tranches, one with a five-year maturity and the other with a ten-year maturity. Part of the money will be used to buy back and repay the maturing Eurobond, as declared by President William Ruto, with the other half coming from a new Eurobond planned for later in the fiscal year. Additionally, the government will likely reach out to investors who own part of the Eurobond due in June 2024 and try to convince them to exchange their holdings for a fresh Eurobond offering an agreed coupon, while the other portion will be retired. 

Moreover, the Treasury is also considering the issuance of a Sukuk bond, which is a Shariah-compliant bond, similar to the one floated by Egypt in February 2023, worth $1.5 billion (Sh211.8 billion) with an overwhelming demand of $5.4 billion (Sh755.5 billion). Lastly, the option of a Samurai bond is also on the table as part of the liability management exercise.

The Samurai bond is a type of debt instrument that is denominated in Japanese Yen and governed by Japanese rules. This is a move by the government to help reduce foreign exchange issues since the shilling has been more stable against the Japanese Yen compared to other major currencies such as the US dollar and the British Pound.