Kenya has made an offer to buy back its $2 billion Eurobonds that will mature in June and revealed plans to issue new debt following a drop in yields on the debt on Tuesday.
The offer will start on Wednesday and will lapse on February 14, 2024 with an intention to buy back the debt at face value and pay the interest that has accumulated.
Citigroup Global Markets and Standard Bank of South Africa will act as the dealer managers for the offer.
According to Bloomberg, the amount that will be repurchased will depend on the price of the new bonds, which is expected to be set on February 12.
The yield on the 2024 bonds fell to 9.96% by 2:55 p.m. in London from 15.79% on Tuesday.
Kenya has been trying to secure funding for the upcoming eurobond repayment amid worries from investors that high food and energy import bills and low foreign-exchange reserves will limit its ability to pay back the debt.
This offer follows a successful buyback from Ivory Coast in January which breathed fresh confidence in the international credit market in Sub Saharan Africa.
Charlie Robertson, head of macro strategy at FIM Partners UK Ltd. in London, said that the main reason for the improved market sentiment was the drop in US treasuries from 5% to 4%, but he also credited the International Monetary Fund.
“They have supported countries from Argentina to Kenya and Pakistan and that has reassured the market that the problems in Ethiopia, Ghana, Sri Lanka and Zambia will not spread.”
Robertson said Kenya’s goal is to exchange its 2024 bonds for 2031 bonds.
The purchase price is $1,000 for every $1,000 of the principal amount of the bonds with the offer set to close at 5 p.m. in New York City on Feb. 14
Purpose of the offer and the new debt issue is to “proactively manage Kenya’s external debt, especially to smooth out the maturity of the bonds due in June 2024”
Kenya will use the net proceeds of the new debt issue to finance the offer.