Ivory Coast bond sale gives Kenya hope of more Eurobonds market
Saturday February 03 2024
Kenya is widely expected to draw its forex reserves, enhanced by recent funding from multilateral lenders, to repay the Eurobond, as yields on its previously issued Eurobonds remain high. PHOTO | SHUTTERSTOCK
Last week’s Eurobond sale by Cote d’Ivoire (Ivory Coast) has brought hope to Kenya of returning to the international capital markets to raise funds.
The issuance, a first by an African country in two years, signalled renewed investor appetite for sovereign debt of emerging and frontier economies.
Cote d’Ivoire’s Eurobond saw a subscription of over $8 billion from more than 400 investors as the country successfully raised $2.6 billion through two bonds with tenures of eight and 13 years respectively, at single-digit interest rates.
Analysts see the bond sale as a marker of rising confidence in African countries’ sovereign debt, reversing previous heightened risk aversion that froze such fundraising.
For Kenya, the events come amid expected redemption of its 2014 debut $2 billion Eurobond in June this year.
Read: Kenya sets new Eurobond buyback date
While Nairobi has already lined up alternatives to issuing a new Eurobond to meet the redemption, the country could push through a new issuance to pay the debt.
Razia Khan, managing director and chief economist for Africa and the Middle East at Standard Chartered Plc, sees the window for Kenya to return to the Eurobond market opening in the second half of the year when she expects risks perceptions towards the country would subside.
“Once the Eurobond is successfully repaid, and we see actual G3 easing (interest rate cuts in advanced economies), risk perceptions towards Kenya are likely to moderate further. Eurobond yields should compress materially by H2-2024/H1-2025, and that could be a better time for Kenya to consider external issuance to refinance future debt maturities,” she said.
“Given the strength of international financial institutions' support, Kenya can afford to wait until market conditions might be more favourable.”
Kenya is widely expected to draw its forex reserves, enhanced by recent funding from multilateral lenders, to repay the Eurobond, as yields on its previously issued Eurobonds remain high.
Read: Volatility hits Kenya’s $2bn Eurobond close to maturity
The expectations of an early return to the international capital markets may have been partly watered down by a push back by major central banks against immediate interest rate cuts which would spur a quicker turnaround of foreign portfolio inflows back into emerging and frontier economies.
Earlier this month, the International Monetary Fund (IMF) indicated it did not expect Kenya to refinance the June maturity through a new bond issuance, prompting it to provide the country with additional funding.
“Urgent balance of payments needs have emerged, primarily due to the $2 billion Eurobond maturing in June 2024 as prior expectations of a full rollover via a bond issuance at a reasonable cost is unlikely to materialise under the prevailing global bond market conditions,” the IMF said.
“The final interest payment on this Eurobond is scheduled for the last week of June 2024, alongside the repayment of the principal amount of $2 billion,” Treasury Cabinet Secretary Njuguna Ndung’u said.