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Kenya To Consider 2nd Eurobond Issue Amid Controversy Over The First One

Kenya To Consider 2nd Eurobond Issue Amid Controversy Over The First One

Less than two years after making a debut on the international bond market that succeeded beyond expectations, Kenya is gearing up to test investor appetite again for eurobonds.

The East African country said it is planning to gauge investor sentiment for new 15- and 20-year eurobonds with an international roadshow scheduled for the next few months, FinancialTimes reported.

In June 2014, Kenya’s first effort to raise capital from European and American investors attracted strong demand. The country wanted to raise $1.5 billion through the eurobond, but eventually raised a record-breaking $2 billion in 5- and 10-year maturities after attracting bids four times its initial target, BBC reported.

How that money was spent has been the subject of recent intense media scrutiny.

Kenya’s main opposition leader, Raila Odinga, has called for an independent forensic audit to track about $1 billion of the proceeds from the debut eurobond sale that he said didn’t make it into the correct government accounts, Bloomberg reported.

In addition to a second eurobond issue, Henry Rotich, Kenya’s finance minister, said he is exploring other ways to raise money including Islamic financing, a soft loan from the China Development Bank, export credit arrangements and a possible Samurai bond, according to John Aglionby in Nairobi.

“We just want to expand our menu,” he said in a FinancialTimes interview. “Which one to pick depends on how quick we can pick one.”

 

The leader of the Kenyan opposition Coalition for Reforms and Democracy has demanded Rotich’s resignation, along with other officials over the missing funds.

“We are convinced that we are in the middle of a great con game, treachery and thievery by the agents of the Kenyan state working in cahoots with international actors,” Odinga told reporters Thursday in the capital, Nairobi, according to Bloomberg.

The Financial Times reported that $600 million of the money raised in Kenya’s first eurobond sale was used to pay off a syndicated loan. The rest was spent on development infrastructure projects such as rural electrification, roads, and health projects.

Kenya’s public prosecutor ordered police and anti-corruption investigators in December to investigate allegations by the opposition of the missing funds. The treasury said it has evidence that all the money is accounted for from the 2014 eurobond sale.

In the last few weeks, Kenyan President Uhuru Kenyatta fired a third of his cabinet “to curb rampant corruption” in his words, GulfNews reported this week.

Police raided senior officials’ houses and confiscated bags of cash. The government has set reference prices for public procurement, established special corruption courts, and instituted so-called “lifestyle” audits of top officials.

U.S. investors bought about two thirds of the first eurobond issue, BBC reported in June, 2014. British investors bought about a quarter. Kenyatta said the sale was a vote of confidence for Kenya.

He said at the time the funds raised would reduce the government’s need to borrow and help reduce interest rates.

“(This) should boost investment, spur economic growth and provide more employment opportunities to our people,” Kenyatta said in 2014 after the first eurobond issue.

Rotich said at the time Kenya planned to borrow more money internationally in the next financial year. “But we are going to diversify,” he said, according to BBC. “We may look at other (types of instruments) … like sukuk bond, diaspora bonds or other denominations.”