Kenya is seeking a lead manager for its first sovereign bond sale in which the government targets raising $1 billion to fund infrastructure development in East Africa’s largest economy.
The country is also seeking expressions of interest for lead-counsel services in a tendering process that ends July 15, the Kenyan Treasury said today in a statement in the Standard newspaper based in the capital, Nairobi.
The offering will enable to Kenya to diversify its investor base, establish a pricing benchmark for future issuances by public institutions and companies and increase the country’s exposure to outside investment, the Treasury said.
Kenya’s move to tap foreign debt markets in 2013 follows similar plans by other African nations including Senegal, Ghana and Nigeria. Rwanda became the first East African country to sell a Eurobond, raising $400 million in April.
African borrowing costs have climbed since the Federal Reserve said on June 20 said it may “moderate” the pace of its bond purchases, reducing the amount of cheap money available to invest in developing- and emerging-market assets.
Average yields on African debt have gained 2.14 percentage points since the start of the year to 6.393 percent yesterday, according to JPMorgan Chase & Co.
Low Appetite
The turbulence may damp investors’ appetite for Kenya’s sovereign bond, Yvonne Mhango, a Johannesburg-based economist at Renaissance Capital, said by phone today.
“The Fed’s announcement will slow interest in the bond sale,” she said.
Yields on Ghana’s $750 million debt due October 2017 halted three days of advanced, dropping 47 basis points to 7.288 percent by 1:50 p.m. in London.
Nigeria’s borrowing costs on bonds due January 2021 retreated 50 basis points to 6.267 percent.
Kenyan Treasury Secretary Henry Rotich said on June 14 the country plans to sell its first Eurobond by the end of September to help plug the budget deficit for the year ending June 2014 and build rail links and power-generation infrastructure.
The planned sale has been postponed since at least 2007.
Standard & Poor’s and Fitch Ratings have a B+ rating on Kenyan debt.
That’s four levels below investment-grade and on par with Zambia and Cape Verde.
It has the equivalent B1 rating from Moody’s Investors Service.
Election Promises
President Uhuru Kenyatta, 51, won elections in March with a promise to accelerate the pace of economic growth to as much as 10 percent by 2015, create 1 million new jobs a year, ensure every Kenyan has access to electricity by 2020 and build a new terminal and runway at the main airport in Nairobi.
Expansion is forecast at 5.6 percent this year, from 4.6 percent in 2012.
The election this year passed peacefully unlike the previous presidential vote in 2007 when more than 1,100 died in ethnic clashes after the opposition disputed the outcome.
“The peaceful end of elections in Kenya should help, so we don’t expect an under-subscription even though interest will slow,” Mhango said.
The shilling snapped a three-day losing streak, gaining 0.4 percent to 85.80 a dollar by 3:13 p.m. in Nairobi, according to data compiled by Bloomberg.
