Analysts are optimistic that Kenya's $1.5 billion sovereign bond planned for this quarter will receive full subscription. The country plans to take to the global financial market with its first ever sovereign bond in the next three months, seeking to raise funds to finance infrastructure development projects. A tranche of the about Sh130 billion will be used to service some old loans. Financial analysts expect the cash call to attract high investor interest given the political, environmental and economic stability the country enjoys. "We are seeing a good appetite for the bond. It should be fully subscribed," said Citibank's Kenya head of markets, Mr Ignatius Chicha . He estimates the bond may attract a rate of about 6.5 per cent or 7 per cent. Rwanda's $400 million Eurobond in May last year was priced at 6.875 per cent and was oversubscribed, denoting a health investor appetite from the international market. Should the bond receive full subscription, Sh51.9 billion ( $600 million ) will be used to service a syndicated loan it secured from Citibank London, Standard Chartered Bank London and Standard Bank of South Africa at 7 per cent in 2012. The remaining Sh77.8 billion ( $900 million ) will finance infrastructure development. PROJECTS ALREADY UNVEILED Already, the government has unveiled 47 projects which it plans to develop in collaboration with the private sector starting this year. The funds will also help reduce the government's over reliance on the domestic market for funds after previously exceeding its borrowing limit. According to Dr Paul Gachanja , an economics lecturer at Kenyatta University , the move to float the Eurobond sends mixed signals. First is scepticism, given that the country is known to have a volatile political environment. Second is the glimmer of hope it holds in a bid to attract financing in an economy that has always shown resilience even in times of crisis. " Kenya is known to be a very volatile environment, politically, although we are stabilising now. But, ultimately, the country has always been seen as an investment hub in the region and this should raise substantial interest in the bond," Dr Gachanja said. There's a lot of hope in economic take-off as the country seems committed to upgrade colonial era infrastructure and replace it with modern ones. This is expected to increase efficiency in the economy and spur growth. The move to raise money from the US and Europe could also be seen as a plan to mend ties with western allies by wooing investors into Kenya's maiden Eurobond. WESTGATE MAJOR IMPACT? In its report done following last year's September 21 terrorist attack at Westgate Mall in Nairobi , Moody's said the hit would not have a major impact on the country's debut Eurobond or multilateral donor financing for infrastructure projects. However, Moody's said Kenya's B1 rating "reflects the country's weak public-sector balance sheet, which is characterised by rising deficit and debt levels. Moreover, its history of political instability, high corruption levels and limited capacity to execute reforms exacerbate risks stemming from its volatile economic fundamentals". Analysts at Standard Chartered Bank argue that Kenya's plan to borrow $1.5 billion from the international market will receive a boost from the country's infrastructure projects. This is on the premise that Kenya is poised for "dramatic transformation in the years ahead" due to not only the region's oil and gas developments but also increased investment in geothermal energy. "Investments in rail capacity, upgrade of the Mombasa port and construction of a new deep-water port at Lamu should help spur activity in 2014. Investment in power, with plans to triple electricity generation to 5,500MW in 40 months, and expansion of Jomo Kenyatta International Airport , are more near-term," say Standard Chartered Bank analysts in their 2014 outlook for Kenya . The country has been doing road shows in the US and Europe to assess the appetite from offshore investors, which analysts say is very good.
Most Popular Stories
- Obama Administration Releases Proposal to Regulate For-Profit Colleges
- Motley Crue's Nikki Sixx Marries Model Courtney Bingham
- Chinese e-Commerce Giant Alibaba Gears for IPO in U.S.
- Some California Cities Seeking Water Independence
- Apple, HP, Intel May Take a Hit from Slowdown in Smartphone Sales Growth
- FDIC Files Lawsuit on Behalf of Banks Allegedly Hurt by Libor Scandal
- SoCalGas Reaches Record Spend on Diversity Suppliers
- Will Missing Malaysian Jet Prompt Aviation System Change?
- Keurig Adds Peet's coffee, Alters Starbucks deal
- Natural Gas Discovery Could Lead to Cleaner Fuels