Kenyan officials are on a round of investment meetings in London to
discuss the country's debut eurobond, pegged at $2bn, says the central
bank. But market volatility is proving a nuisance and Kenya could be
forced to delay the much-anticipated bond.
On Tuesday, analysts at Fitch Ratings said in a teleconference in
London that the issue was unlikely to take place before April. Those
remarks contrast with those of Kenyan officials, who reportedly said
on Monday they were going ahead with plans to issue this month. So, is
it going to happen?This from Stephen Charangwa, fixed income portfoilio manager at Silk Invest:
The current market volatility in EM could further delay the issuance
but any opportune window of stability in market conditions in the
interim could see them coming to the market impromptu. It is
increasingly a question of when, not if, for this debut issue.
Overall, we expect the issue to be comfortably taken up by foreign
investors despite a projected Debt/GDP of 50%, above recent regional
peer issuers, but still relatively low from a global perspective. The
potential use of proceeds to retire the $600m syndicated loan will
somewhat reassure investors concerned with spiralling debt servicing
costs with rising debt.
An official at the Central Bank of Kenya did confirm that a team
arrived in London this week to discuss the sale, without disclosing
Carmen Altenkirch, Fitch's lead analyst for Kenya, said: "In terms of
when they are likely to go in, I think at the moment markets are
obviously very volatile. So even if the Kenyan authorities were
looking to go in early March, I think they may well delay slightly
until volatility dies down."
Richard Fox, head of Middle East and Africa sovereigns, said: "If you
look at last May when we had the taper tantrum, it took a couple of
months for the market to settle down, in fact [for] Nigeria to issue.
You could be looking at a couple of months delay.
"At the end of the day how much they issue and when they issue will be
very much determined by market conditions, as of course will be the
price they will end up having to pay," he said.
Altenkirch added: "The question is exactly how much they decide to
issue. In the market you've heard figures bouncing around of anything
between $1.5bn and 2bn, with at least 600m of that going to repay
Kenya's more expensive syndicated loan that they took out in 2012.
There are two things worth bearing in mind. The first, although of not
immediate concern, is the roll over risk.
Interestingly, if Kenya were to go ahead with the $2bn issue, it would
amount to roughly 30% of the country's current foreign currency
reserve, which is significantly higher than recent issuers like Ghana
"The second and perhaps more immediate concern is the possibility of
high carry costs, if the funds cannot be put to use immediately,
although this needs to be weighed up against the risks that we will
see further increases in interest rates as Fed tapering gathers
momentum during the course of this year."And this from Ahmed Salim, senior associate at Teneo Intelligence:
Kenya's economic outlook, which by all accounts is positive, has
provided the environment for the issue to occur. The government is
keen on issuing the bond as soon as it can, but there are risks of
further delay especially since they have only now begun to market to
investors. The assumption is that global investors will have the
appetite for the issue which is why the IMF's support was seen as a
much-needed endorsement. The doubts will continue to be centered on
factors that can undermine the economic outlook and worry investors
(security and fiscal challenges). Some economists have also expressed
concern over how long the government and central bank can maintain the
strong exchange rates in the long term.ConclusionsAly-Khan Satchu | February 5 5:00am | Permalink
It is a very rare Thing when all the Ducks stack up in a row unless of
course, You are, of course Paul Kagame's Rwanda and you just happen to
slot the Eurobond markets when the US 10 Year is at a bubble low Yield
of 1.795%. Furthermore, Turmoil in EM Markets has put a Safe Haven bid
into the US Bond Market and has rallied the 10 Year close to 40 bps.
Given that the US 10 Year is the Baseline, The Kenya Government is
gaining some small relief from that baseline improvement. And who is
to predict whether this Tantrum might well morph into something
entirely more brutal later down the Track this year. Therefore, I
would err on the side of pricing with a degree of concession and
pulling the Trigger sooner rather than later. The Frontier Markets
remain nascent and Asset Class Demand for SSA Sovereign Paper is
muscular. Aly-Khan Satchu Nairobi
27-JAN-2014 ::Mineral Export Licence Holdup could hit planned Eurobondhttp://www.rich.co.ke/media/docs/038NSX2701.pdf
04-NOV-2013 ::Kenya joins Africa's Eurobond Leaguehttp://www.rich.co.ke/media/docs/039NSX0411.pdf
Kenya: 4 men charged in court for airport bombing @washingtonposthttp://www.washingtonpost.com/world/africa/kenya-4-men-charged-in-court-for-airport-bombing/2014/02/04/965ead68-8d9b-11e3-99e7-de22c4311986_story.html
Four men, including a man identified as a Somali diplomat, have been
charged in a Kenyan court with terrorism-related offenses for the
detonation of an improvised explosive device at a popular restaurant
at the Nairobi international airport.
The four denied involvement Tuesday in the Jan. 16 attack, which blew
up a trash can and part of the ceiling of the Java House restaurant
near the entrance of an international departure terminal at Jomo
Kenyatta International Airport. No one was injured.
international Internet bandwidth per Internet user increased
substantially in 2012, and Kenya has become the country with the
largest amount of international Internet bandwidth per Internet user
in the Africa regionhttp://www.itu.int/en/ITU-D/Statistics/Documents/publications/mis2013/MIS2013_without_Annex_4.pdf
increase in international Internet bandwidth per Internet user, which
jumped from 4 500 Mbit/s in 2011 to 24 000 Mbit/s in 2012. In terms of
international Internet bandwidth per Internet user, this makes Kenya
the bandwidth-richest country in Africa (Box 2.11).
The government will not inject fresh capital in KenGen during the
planned rights issue, Energy Cabinet Secretary Davis Chirchir has
Instead, the state, which holds a 70 per cent stake in the Nairobi
Securities Exchange (NSE)-listed firm, will convert part of a debt
that KenGen owes the government into equity. At the moment the
electricity generator owes the government a total of Sh27 billion.
"We will propose to the Cabinet to allow government to convert its
debt to equity," Mr Chirchir said in an interview.
At an annual general meeting held in December, shareholders approved a
proposal to raise Sh15 billion through a rights issue and an
additional Sh15 billion through debt.
To keep a hold of its 70 per cent stake, the government needs to
inject about Sh11 billion. The rights issue is planned to be concluded
"The equity we are looking to raise needs to come in before we borrow.
We could also invite a strategic investor," said KenGen managing
director, Mr Albert Mugo. The money will be used to fast-rack its
multibillion shilling projects in power production.
A consortium led by Barclays, Dyer and Blair Investment Bank, KPMG and
law firm Hamilton Harrison & Mathews -- currently arranging a Sh430
billion ($5 billion) through bonds and loans -- will shepherd the cash
Among the projects lined up are two coal plants at Lamu and Kitui's
Mui Basin area, the grand 280MW geothermal project and some 100MW of
wind power near the border of Meru and Isiolo counties.
KenGen share price data here -11.764% 2014http://www.rich.co.ke/rcdata/company.php?i=Mzc%3D
Kenya Shilling versus The Dollar Live ForexPros 86.348 Lasthttp://j.mp/5jDOot
Nairobi All Share Bloomberg -0.10% 2014http://www.BLOOMBERG.COM/quote/NSEASI:IND
Nairobi ^NSE20 Bloomberg -0.87% 2014http://j.mp/ajuMHJ
Every Listed Share can be interrogated herehttp://www.rich.co.ke/rcdata/nsestocks.php