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Kenya Eurobond 2014
Rank: New-farer Joined: 12/16/2013 Posts: 49 Location: Nairobi
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I am sure most of us are in anticipation of the Eurobond issue. Which was to be issued in Q1 2014. Increased interest from Foreigners indicates the Bond may be over subscribed, Taper or no Taper. http://www.businessdaily...0/-/u7igap/-/index.html
I have a few questions though: 1. Will they list the Bond on the Bourse as happened in Ghana Read: http://www.etvghana.com/...eadlines&Itemid=530
2. Will the Monies accrued be used on recurrent expenditure as witnessed in Ghana before 3. Will the Eurobond have any implications on the Bond market, as far as the already issued bonds losing some value. If the Eurobond is listed?? "'Nowadays people know the price of everything and the value of nothing.' - Oscar Wilde.
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Rank: New-farer Joined: 4/12/2014 Posts: 56
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Hey guys;
Seems Uhuru is keen on this one...going by what we are reading in the papers.
Maswali yangu ni haya (we need to apply theory to our market even though many times it does not work):
1) Should we underweight banks now? Rates could drop and CBK could reduce borrowing from the local market substantially.
2) Should we go long on current bond issues until the Eurobond is issued. If rates drop the current issues could rise in value
3) What does this mean for the stock market?
4) Where will people take all this money that is floating in the economy? Is it time to go heavy in real estate?
Tafakari hayo....have a great day guys....
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Rank: Chief Joined: 8/4/2010 Posts: 8,977
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Wait for the outcome if indeed the eurobond does float. If you try to frontrun as you state above in this unclear and uncharted waters you risk burning properly. $15/barrel oil... The commodities lehman moment arrives as well as Sovereign debt volcano!
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Rank: Elder Joined: 7/26/2007 Posts: 6,514
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My take: 1. This bond will not come cheap, given African risk is now priced at the 8% levels, we should not see it lower than that. 2. Proceeds of this bond will be used twofold: to retire the bank facility, priced at 7% albeit short-term, and park the balance in overseas bank accounts and hold as reserves ( useless, really). 3. This will cause interest rates on foreign currency facilities in Kenya to rise, since the bond yield will be the very minimum a bank is willing to earn. 4. It will not stop GOK from raising kenya shilling at present pricing as that will still be needed for recurrent expenditure, like samosas, mandazis and tints for IG's feikols. I think this bond was not well thought out. Business opportunities are like buses,there's always another one coming
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Rank: Elder Joined: 9/15/2006 Posts: 3,905
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@KulaRaha, will this come to pass?
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Rank: Veteran Joined: 4/16/2014 Posts: 1,420 Location: Bohemian Grove
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muganda wrote:@KulaRaha, will this come to pass?
I thought it was headed to the 95-100 in the next 12 months
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Rank: Elder Joined: 7/26/2007 Posts: 6,514
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Pure fantasy...the dollar will stay as it is as essentially this bond will give CBK more ammunition to intervene in the market and force stability. In my opinion, the Shilling is totally overvalued. Business opportunities are like buses,there's always another one coming
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Rank: Chief Joined: 8/4/2010 Posts: 8,977
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muganda wrote:@KulaRaha, will this come to pass?
Possible depending on how oil/gas revenues will be handled.
Another thing is the yuan clearing house.$15/barrel oil... The commodities lehman moment arrives as well as Sovereign debt volcano!
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Rank: Chief Joined: 8/4/2010 Posts: 8,977
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Just seen this article. Kenya extends syndicated loan, giving it time to resolve Eurobond delay - http://www.reuters.com/a...s-idUSL6N0O12XP20140515
Quote:Kenya has won a three-month extension on a $600 million syndicated loan, a Treasury official said on Thursday, giving it time to continue discussions on its delayed debut dollar bond.
The government also said it had reached a deal to settle a long-running row over paying past contracts that had threatened plans for the Eurobond, which could be worth up to $2 billion.
The east African nation took out the two-year syndicated loan at an interest rate of 7 percent in 2012 to fund development projects. It had intended to use some of the proceeds of the planned Eurobond to pay it off.
Kamau Thuge, the Finance Ministry's principal secretary, said he was "hopeful" the bond issue would be completed, otherwise he said the loan would be paid from foreign reserves. Now I see why KES is taking it in chin vs USD and the other major FX ccys. This eurobond, got a sneaky feeling it won't float anytime soon! $15/barrel oil... The commodities lehman moment arrives as well as Sovereign debt volcano!
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Rank: Elder Joined: 7/10/2008 Posts: 9,131 Location: Kanjo
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Rank: Elder Joined: 10/1/2009 Posts: 2,436
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And 4X no less!
What an amazing feat-riding roughshod over headlines of a terror attack! Rotich, Min of Fin, Treasury mandarins et al must be one bunch of seriously extremely relieved fellas.
And haiya, I never knew there were 2 tenors ($500m and $1m) , all along I thought it was just one tenor for 10yrs...
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Rank: Elder Joined: 7/26/2007 Posts: 6,514
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Very good timing, just in the middle of a rally. Well sold, I am pleasantly surprised by the yields..buyers were not too aggressive. Now, what will they do with the money? Business opportunities are like buses,there's always another one coming
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Rank: Elder Joined: 10/1/2009 Posts: 2,436
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Vital stats, to put the yield in perspective:
Kenya sells $1.5b of 10yr Bond at 6.875%; $500m tenor 5yr bond at 5.875%. Compare with previous issues:
Ghana's Eurobond: $750m 10yr tenor @ 8.0%
Nigeria's: $500m 10yr @ 6.625%
Zambia's: $750m 10yr @ 5.625%
Rwanda's: $400m 10yr 6.875%
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Rank: Chief Joined: 1/3/2007 Posts: 18,121 Location: Nairobi
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KulaRaha wrote:Very good timing, just in the middle of a rally. Well sold, I am pleasantly surprised by the yields..buyers were not too aggressive.
Now, what will they do with the money? Pay Anglo-leasing. http://www.standardmedia...s-billions-of-shillings Note that Kamani has been 'negotiating' but could sue based on the recent payment to Perera. Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett
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Rank: Chief Joined: 1/3/2007 Posts: 18,121 Location: Nairobi
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Intelligentsia wrote:Vital stats, to put the yield in perspective:
Kenya sells $1.5b of 10yr Bond at 6.875%; $500m tenor 5yr bond at 5.875%. Compare with previous issues:
Ghana's Eurobond: $750m 10yr tenor @ 8.0%
Nigeria's: $500m 10yr @ 6.625%
Zambia's: $750m 10yr @ 5.625%
Rwanda's: $400m 10yr 6.875%
Rwanda is a small(er) country and raised it when things were rough so Kenya didn't get that great a deal. The currency is managed. Zambia got a great deal but the Kwacha is crashing/crashed as copper prices tumbled. Ghana is a perennial over-spender. A pity. The Cedi is trading at 3 per USD from 1.7 per USD when it sold the Eurobond. Nigeria is in its own league. I don't follow it much. $500mn is not a lot for Nigeria which doesn't need loans if the government officials stop stealing. Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett
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Rank: Member Joined: 9/29/2010 Posts: 679 Location: nairobi
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this will make local dollar borrowing become more expensive! quite a number of banks will be left with their pants down
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Rank: Elder Joined: 10/1/2009 Posts: 2,436
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kizee1 wrote:this will make local dollar borrowing become more expensive! quite a number of banks will be left with their pants down How, and yet the economy will be suffering a deluge of USD? One would have thought the pricing for USD-denominated facilities will fall - the old tale of (excess) supply vs demand? Fafanua. Unless you mean local banks will now tie their usd-lendings to the Eurobond pricing?
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Rank: Chief Joined: 1/3/2007 Posts: 18,121 Location: Nairobi
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Intelligentsia wrote:kizee1 wrote:this will make local dollar borrowing become more expensive! quite a number of banks will be left with their pants down How, and yet the economy will be suffering a deluge of USD? One would have thought the pricing for USD-denominated facilities will fall - the old tale of (excess) supply vs demand? Fafanua. Unless you mean local banks will now tie their usd-lendings to the Eurobond pricing? Local USD lending is tied to what local banks can borrow USD at not what GoK borrows at. There may be a correlation between what GoK borrows at vs local banks borrow at BUT there is a wide differential on what rates BBK or Citibank can borrow at vs Jamii or Paramount vs DTB or I&M... Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett
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Rank: Member Joined: 9/29/2010 Posts: 679 Location: nairobi
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VituVingiSana wrote:Intelligentsia wrote:kizee1 wrote:this will make local dollar borrowing become more expensive! quite a number of banks will be left with their pants down How, and yet the economy will be suffering a deluge of USD? One would have thought the pricing for USD-denominated facilities will fall - the old tale of (excess) supply vs demand? Fafanua. Unless you mean local banks will now tie their usd-lendings to the Eurobond pricing? Local USD lending is tied to what local banks can borrow USD at not what GoK borrows at. There may be a correlation between what GoK borrows at vs local banks borrow at BUT there is a wide differential on what rates BBK or Citibank can borrow at vs Jamii or Paramount vs DTB or I&M... very few local banks have USD balance sheets many operate a higher loans to depo ratio on fcy,they thus resort to funding thru either fx swaps or borrowing from multinationals
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Rank: Elder Joined: 7/26/2007 Posts: 6,514
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There is massive demand for USD borrowing among corporates, with very few USD liabilities. USD lending rates must rise. Business opportunities are like buses,there's always another one coming
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