Kenya plans Sh117b Eurobond buyback to ease debt burden

By Amina Wako
Tuesday, February 25, 2025

This marks the second time the Treasury has undertaken a Eurobond buyback. The first occurred in February 2024, when the government repurchased a $1.48 billion (Sh191.9 billion) portion of the $2 billion (Sh259.3 billion) 2014 Eurobond, just four months before its maturity.

Government has announced plans to repurchase a $900 million (Sh116.7 billion) seven-year tranche of the $2.1 billion (Sh271.76 billion) Eurobond issued in May 2019. This move will be financed using the proceeds of a proposed new bond with a longer tenor in a bid to smooth out the country’s external debt profile.

This marks the second time the Treasury has undertaken a Eurobond buyback. The first occurred in February 2024, when the government repurchased a $1.48 billion (Sh191.9 billion) portion of the $2 billion (Sh259.3 billion) 2014 Eurobond, just four months before its maturity. The buyback was funded through a new seven-year bond worth $1.5 billion (Sh194.5 billion).

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“The Republic is making the offer, in conjunction with the offering of the new notes (new Eurobond), as part of the proactive management of Kenya’s external indebtedness, specifically to smooth out the maturity profile of the notes,” said the Treasury in its buyback announcement.

The 2019 Eurobond was initially issued in two tranches: a seven-year bond worth $900 million at an interest rate of seven percent and a 12-year bond worth $1.2 billion (Sh155.6 billion) at eight percent. The buyback specifically targets the seven-year tranche, which is scheduled to be amortised in equal installments of $300 million (Sh38.9 billion) in 2025, 2026, and 2027. The first repayment was due in May of this year.

By refinancing the bond through this buyback and the issuance of new Eurobonds, the government aims to avoid making the May installment while managing rising domestic and external debt servicing costs.

Regulatory filings show that the buyback will cover the entire outstanding value of the seven-year tranche. The government is offering bondholders $1,002.50 (Sh129,720.46) for every bond unit of $1,000 (Sh129,396.51) sold back.

Additionally, the new Eurobonds will prioritise existing bondholders, enabling them to convert their soon-to-mature bonds into longer-tenor securities.

"When the Republic decides how to distribute any new notes (the new Eurobond), they will prioritize noteholders who have already tendered or told the Republic or a dealer manager that they are sure they want to tender the notes (the 2019 Eurobond)," the Treasury said.

Kenya’s first Eurobond issuance took place in June 2014, raising $2.75 billion (Sh356.5 billion) in two tranches of five and ten years. Subsequent issuances followed in 2018, 2019, 2021, and most recently in February 2024, which raised $1.5 billion (Sh194.09 billion) to fund the buyback of the 2014 bond.

Financial analysts view the latest buyback as a crucial step in stabilising Kenya’s debt management. “This strategy helps the government manage its debt repayment obligations while reducing the immediate financial strain,” said a senior economist from a leading investment firm. “However, the success of the new bond issuance will depend on investor confidence and prevailing global market conditions.”