Foreign Investors gives Ruto a nod for another Eurobond
President William Ruto has received approval from foreign investors for another Eurobond issuance, given that African nations faced restrictions in the global market.
According to a report from Bloomberg, Simon Quijano-Evans, the chief economist at Gemcorp Capital Management, commended Kenya’s approaches in managing the Eurobond debt.
Quijano-Evans suggested that Kenya could potentially become the first African nation to receive principal funds in 2024.
He highlighted that although Kenya’s initial interest rates were higher than those in the United States, they have since decreased significantly.
This reduction in interest rates has made it more cost-effective for Kenya to pursue a new Eurobond, typically denominated in US Dollars (USD).
The increased confidence of investors in Kenya’s debt repayment capabilities is a positive indicator for the country’s economy. As of June 2024, Kenya will need to settle its latest Eurobond, amounting to Ksh317 billion.
In December of the previous year, Kenya honored a payment of Ksh10.8 billion (equivalent to USD 68.7 million) in interest owed on the Eurobond. This followed a departure from the initial intention to make an early payment of the principal amount before the conclusion of 2023.
“Kenya could well be the first to issue this year and one would imagine that market demand would be forthcoming,” Evans stated.
“If markets perceived that a new bond issue was coming, that could also help pull down spreads from current levels as it would imply an improvement in the country’s financial position for 2024.”
Other countries vying to break free from the borrowing dry spell included South Africa, Angola, and Nigeria.
Moody’s, a company specializing in international financial research on bonds issued by both commercial and government entities, has projected a negative outlook for many African nations this year.
The risk of defaulting is a significant concern according to their assessment.
“That’s a reflection of risks from large debt burdens and the difficulties many countries will have refinancing at rates they can afford,” the firm noted.
Ethiopia, which defaulted on the payment of the interest fee for its Ksh159 billion Eurobond, has raised concerns among international investors. This default has heightened the perceived risk associated with injecting capital into projects in African countries.
“Many will remain locked out of international debt markets, while for many interest rates will be unaffordable,” Robert Besseling, Chief Executive Officer of Pangea-Risk, an advisory firm focusing on analysis of economies in African countries.
For the past 22 months, no African nation has secured an international bond, signaling a clear trend of investors avoiding engagements with the continent.
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Foreign Investors gives Ruto a nod for another Eurobond
