Kenya may raise external debt with sukuk, diaspora offerings

Kenya may expand its global debt offerings to sukuk and diaspora bonds as it seeks to broaden the country’s investor base after the success of its debut Eurobond sale, Treasury Secretary Henry Rotich said.

The East African nation attracted bids worth more than five times the $2 billion raised in the offering earlier this month, with US investors the biggest buyers followed by the UK, Rotich told reporters in the capital, Nairobi.

Kenya’s budget deficit is estimated at 342 billion shillings ($3.9bn) in the fiscal year from July, of which net external financing will fund 150 billion shillings, or 3.2 percent of gross domestic product, and domestic borrowing will cover 191 billion shillings, according to budget documents.

“In the next financial year we have programmed some amount that we would like to borrow externally through the international capital markets,but we are going to diversify,” Rotich said. “It may not necessarily be the Eurobond, we may look at other products like sukuk bonds or diaspora bonds or other denominations. The objective is to widen the investor base.”

Kenya raised a $500 million tranche of Eurobonds due in 2019, carrying a 5.875 percent interest rate and a $1.5 billion portion maturing in 2024, at 6.875 percent in the sale, which closed Wednesday.

The yield on the 10-year debt was little changed at 6.483 percent by 3:10pm in Nairobi.

Proceeds from offering, the largest by a first-time African issuer, will be used to repay a $600 million syndicated loan and finance infrastructure development.

The government may cut its target for borrowing domestically in 2014-15, as it looks to international capital markets, which may lead to lower local interest rates and help spur growth in the economy, Rotich said.

Nigeria, the largest economy in Africa, also plans a $300 million diaspora bond this year.