Rotich eyes syn­di­cated loan ahead of Eurobond

Business Daily (Kenya) - - FRONT PAGE - Kevin Mwanza kmwanza@ke.na­tion­media.com

The Na­tional Trea­sury said yes­ter­day it was con­sid­er­ing tak­ing an­other syn­di­cated loan ahead of a planned is­suance of an­other Eurobond to re­fi­nance an­other loan whose Oc­to­ber ma­tu­rity was ex­tended by six months.

Trea­sury sec­re­tary Henry Rotich said the ma­tur­ing date for the $750 mil­lion (Sh77.25 bil­lion) syn­di­cated loan taken in 2015 was ex­tended to April next year to give room for a re­fi­nanc­ing plan.

“We have ex­tended it to al­low for a re­fi­nanc­ing ar­range­ment,” Mr Rotich said at a Press brief­ing in Nairobi.

“We took the op­tion of syn­di­ca­tion as we wait for op­tions. But if we is­sue a bond early, it can re­pay that,” he added.

Close to 10 per cent of the lenders that par­tic­i­pated in the 2015 syn­di­cated loan were paid on Oc­to­ber 27, while the rest opted to wait. Mr Rotich said this means a slightly

higher in­ter­est rate on the re­main­ing amount of the debt. Kenya is­sued a de­but Eurobond worth $2 bil­lion in June 2014 that was over­sub­scribed, al­low­ing it to get a bet­ter in­ter­est rate than other sub-sa­ha­ran Africa is­suers such as Ghana and Zam­bia.

Pro­ceeds from the Eurobond were partly used to re­tire a $600 mil­lion syn­di­cated loan, whose ma­tu­rity was ex­tended by three months, and other bud­getary spend­ing, in­clud­ing in­fra­struc­ture projects.

In March, Kenya bor­rowed Sh82 bil­lion ($800 mil­lion) in a syn­di­cated loan from a con­sor­tium of four banks – Stan­dard Char­tered, Stan­dard Bank, Citi and Rand Mer­chant Bank. The coun­try’s dol­lar stock rose sharply in the first quar­ter driven by $2.24 bil­lion for­eign loan in­flows con­sist­ing of $986.9 mil­lion (Sh101.88 bil­lion) loan from the Chi­nese gov­ern­ment, $800 mil­lion (Sh82.58 bil­lion) syn­di­cated com­mer­cial loan and $450 mil­lion (Sh46.45 bil­lion) loan from Pref­er­en­tial Trade Area and African Ex­port Im­port Bank, ac­cord­ing to the Trea­sury’s pub­lic debt records.

Mr Rotich said the Trea­sury was as­sess­ing the in­ter­na­tional debt mar­ket for a good tim­ing to en­ter for an­other Eurobond.

“When we en­tered in 2014 we got a good deal. If we en­ter the mar­ket right now the cost will be high,” he said, adding that a pos­si­ble rat­ing down­grade by Moody’s will not change much.

The global rat­ing agency last month said it was look­ing at cut­ting Kenya’s credit rat­ing from B1 due to per­sis­tent deficits as high bor­row­ing costs con­tin­ued to push it deeper into in­debt­ed­ness.

Mr Rotich said Kenya had only con­tracted Stan­dard & Poor’s (S&P) and Fitch to pe­ri­od­i­cally gather data from Trea­sury and that Moody’s was most likely ‘do­ing a desk job’ on the coun­try’s debt.

The gov­ern­ment has strug­gled to con­tain its ex­penses and meet its rev­enue tar­gets, a sit­u­a­tion that was made worse by pro­longed drought ear­lier this year and a po­lit­i­cally charged en­vi­ron­ment that took it off the pol­icy track.

The rapid rise in Kenya’s pub­lic debt to more than Sh4.4 tril­lion at a time when the tax­man is strug­gling to meet his tar­gets has raised fears over sus­tain­abil­ity of the loans.

A Bud­get Re­view and Out­look Pa­per (BROP) re­leased in Septem­ber showed that pub­lic debt to GDP ra­tio was ex­pected to rise to 59.0 per cent, from a pre­vi­ous tar­get of 51.8 per cent.

It also showed that Kenya’s fis­cal deficit tar­get had been re­vised to 7.9 per cent in the 2017/18 fis­cal year, from a 6.2 per cent, after rev­enue col­lec­tion fell 3.7 per cent short of tar­get.

Mr Rotich said tax ex­emp­tions given to im­porters of food such as maize and sugar in the first half of this year to help mit­i­gate the ef­fects of a se­vere drought in the horn of Africa, had con­trib­uted to a Sh40 bil­lion short fall in rev­enue.

SALATON NJAU

DEBT Trea­sury sec­re­tary Henry Rotich.

EX­PENSES Na­tional Trea­sury build­ing in Nairobi. -FILE

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