Kenya launches $2bn debut bond roadshow

Kenya launched its much-delayed attempt to raise a $2 billion debut sovereign bond on Wednesday with a 10-day campaign starting in the US.

Investors eager to tap growth in East Africa’s top economy – one of the last big economies on the continent to issue a eurobond – have awaited for years the issue, touted at $1.5 billion-$2 billion.

“The amount raised will be determined at the end of the roadshow; the government would like $2 billion,” said a person familiar with the eurobond strategy.

Nairobi wants to fund heavy infrastructure investment and pay off a $600 million syndicated loan from 2012, the repayment deadline of which was extended to mid-August last month.

African countries raised a record of more than $11 billion in hard-currency sovereign bonds last year, up from $6 billion in 2012 and just $1 billion in 2000, according to industry estimates.

The region has been a beneficiary of investor hunger for yield triggered by easy monetary policies in Europe, the US and Japan.
Apart from South Africa, Zambia is the only African country to have tapped the market this year, raising $1 billion with a 10-year note.

But Morocco, Ghana and Ivory Coast are lining up to go to the market before the summer lull, taking advantage of renewed interest in frontier markets. Kenya’s neighbour Tanzania is also considering the market but bankers say it is unlikely to push ahead until later in the year.

Despite a series of political and legal hold-ups in Kenya, analysts expect interest to run high.

David Cowan, chief Africa economist at Citibank, said that despite the hold-ups and legal entanglements, “the market is still pretty bullish on Kenya and the new issue”.

Kenya first delayed market entry when post-election violence sent growth and foreign investor appetite tumbling in 2008. This year European court rulings pertaining to the 10-year-old Anglo Leasing corruption scandal threatened to entangle the eurobond in a protracted legal drama.

“The broad appeal of the bond is that it is increased exposure to the Africa growth story but not…commodity dependent,” Cowan said, referring to Kenya’s largely consumption-driven economic growth.