Kenya aims for African record $2 billion bond sale

Kenya has broken African records by raising $2 billion from global investors in its debut bond sale.

Kenya has raised as much as $2 billion (£1.18 billion) from institutional investors on its debut in the sovereign bond market, the Financial Times reports – the biggest ever debut for an African nation.

High levels of demand from investors such as pension funds, sovereign wealth funds and insurance companies all came together to propel Kenya to its success – and with investors having placed orders for over four times more than the government eventually raised, it seems that risk appetite in the world’s markets is bouncing back.

The deal has been 17 years in the making, but it seems that the timing was almost perfect in the end. After the US Federal Reserve began winding back its quantitative easing measures a few months ago, the Kenyan government feared it may have missed its chance – tighter US policy was expected to push repayment rates upwards.

Reuters Africa reports that fund managers remain positive about the country’s prospects as a whole – the outlook for both growth and future monetary policy are encouraging, and concerns on issues such as security are not thought to be severe enough to derail the nation’s performance.

In contrast, even though there has been a flurry of African nations seeking to sell bonds on global markets this year, other nations have suffered – Ghana’s growing budget deficit and debts have caused problems of late, while Rwandan bond yields rocketed just a few weeks after a sale last April. Zambia has struggled as a result of the falling price of copper, a major export.

But after the International Monetary Fund (IMF) intervened in Zambia and Egypt’s outlook improved in the wake of the country’s elections, interest in what Kenya has to offer has begun to recover.

According to Bloomberg, the sale involved $500 million in five-year securities priced to yield 5.875 per cent, as well as $1.5 billion of ten-year bonds at 6.875 per cent.

Earlier this year, troubled Zambia had offered a yield of over seven per cent on ten-year bonds. Kenya and Zambia share a B1 credit rating awarded by Moody’s Investors Service – three levels below investment grade.

Infrastructure projects across Kenya will be the biggest beneficiaries of the bond sale, while a $600 million loan that matures in August will also be repaid with the proceeds.