Kenya announced the plan of buying back the 7-year tenor USD 900.0 million Eurobond tenders issued in 2019 with a maturity of May 2027.
In the announcement, Kenya stated that the buyback plan would be financed by the issuance of a new Eurobond. The Kenyan 7-year tenor bond that was issued in 2019 at a coupon rate of 7.0 percent is due for maturity in May 2027, and was to be repaid in installments of USD 300.0 million starting from May 2025, into May 2026 and May 2027.
During the week, the Government of Kenya released the results of the USD 900.0 million Eurobond buyback. Kenya had invited bondholders to sell their bonds for cash, at USD 1,002.5 per USD 1,000.0, plus the accrued interest payments on the notes, with the offer closing on 3rd March 2024.
The offer was undersubscribed, receiving a total amount of USD 579.7 million by investors, translating to a subscription rate of 64.4 percent, falling short of the maximum possible buyback amount of USD 900.0 million.
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While more than half of the bondholders chose to sell their bonds back to the government, some opted to retain them, likely anticipating better returns in the future. As a result, Kenya was unable to fully retire the bond as planned, leaving USD 320.3 million of the bond still outstanding, which will need to be repaid at maturity.
The purchase price of accepted tenders was USD 1,002.5 per USD 1,000.0, plus the accrued interest payments on the notes, with a settlement date of 10th March 2025. Once settled, the repurchased bonds will be permanently cancelled, while any remaining bonds will continue to trade as usual.
To fund this buyback, Kenya issued a new USD 1.5 bn 11-year Eurobond. The Government, on 27th February 2025, announced the results of the tender offer, highlighting that the new issue attracted a yield of 9.95 percent and a coupon rate of 9.5 percent.
The new Eurobond offer received high traction, receiving tenders worth USD 4.9 bn, translating to a subscription rate of 326.7 percent, with Kenya accepting bids worth USD 1.5 bn, translating to an acceptance rate of 30.6 percent. The surplus of 0.6 bn will be used to refinance other existing external debt falling due later in the year.
The successful buyback and issuance of the new Eurobond has resulted in a 13.9 percent increase in Kenya’s outstanding Eurobond debt to USD 7.5 billion after the buyback and new issue from USD 6.6 billion before the buyback and new issue, implying that while the government managed to ease short-term repayment pressure, it did so at the cost of higher debt and increased interest expenses. The overall increase in external debt obligations raises concerns about long-term debt sustainability challenges and weakens the fiscal position.
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