Kenya plans to buy back Sh117 billion of Eurobonds to alleviate the debt burden and manage its external debt profile effectively. This follows a similar buyback from February 2024. The government aims to refinance existing obligations through new bond issuances, prioritizing current bondholders for longer maturities while addressing upcoming repayments.
Kenya is initiating a Sh117 billion Eurobond buyback, aimed at alleviating the debt burden on the country. This is the second Eurobond buyback by the Treasury, following a previous repurchase in February 2024 of $1.48 billion of the 2014 Eurobond, which was executed four months prior to its maturity.
With this latest announcement, the government plans to buy back a $900 million (Sh116.7 billion) tranche from a total $2.1 billion Eurobond issued in May 2019. This transaction will be financed through the proceeds from a planned issuance of new bonds, intended to better manage the external debt profile.
The Treasury explained that the buyback is part of a strategy to proactively manage external indebtedness to smoothen the maturity profiles of the bonds. The 2019 Eurobond was issued in two different tranches: $900 million over seven years and $1.2 billion over twelve years, with the buyback specifically focused on the seven-year tranche due for amortization between 2025 and 2027.
The government aims to circumvent the first repayment due in May and address rising debt servicing costs by refinancing the existing bonds through this buyback. All proceeds from the buyback will cover the entire outstanding amount of the seven-year tranche, with bondholders being offered $1,002.50 per $1,000 bond unit returned.
Additionally, the new Eurobonds are designed to give priority to existing bondholders, allowing them to exchange their maturing securities for longer-term ones. The Treasury stated, “When the Republic decides how to distribute any new notes, they will prioritize noteholders who have already tendered or expressed willingness to tender the notes.”
Kenya’s initial Eurobond issuance occurred in June 2014, raising $2.75 billion. This was complemented by subsequent issuances in 2018, 2019, 2021, and another in February 2024, totaling various sums aimed at funding different government initiatives, including previous buybacks.
Experts regard the current buyback as essential for stabilizing Kenya’s fiscal management strategy. According to a senior economist, “This strategy helps the government manage its debt repayment obligations while reducing the immediate financial strain,” stressing that the new bond’s success hinges on investor confidence and market conditions.
Kenya’s approach to manage its external debt through a Eurobond buyback reflects a strategic effort to relieve debt obligations while optimizing bond structures. By refinancing through new bond issuances, the government seeks not only to extend maturities but also to stabilize its financial commitments in light of rising costs. The outcomes will largely depend on external market conditions and investor sentiments.
Original Source: eastleighvoice.co.ke
