Kenya to push ahead with Eurobond, unsure of yield -finance minister

NAIROBI, March 10 Mon Mar 10, 2014 2:01pm EDT

NAIROBI, March 10 (Reuters) - Kenya will push ahead with a debut Eurobond even though market conditions have deteriorated and it is not clear what yield it will have to pay, Finance Minister Henry Rotich said on Monday.

The east African country plans to borrow up to $2 billion from overseas financial markets but postponed its investor roadshow, which had been expected to start in January.

Rotich said Kenya will set a date for roadshows once it receives clearance from the stock exchange where the bond will be listed.

"We are progressing," Rotich told Reuters by telephone. "In a short while, maybe as soon as we get the clearance, we should be proceeding to that (roadshow) stage."

International bond issuance by African sovereigns hit a record high in 2013 as foreign investors sought higher yields among fast-growing economies such as Rwanda and Ghana.

However, the delay in Kenya's roadshow and greater market volatility triggered by the United States reducing its economic stimulus programme have made some investors question whether Kenya will be able to borrow as much as it hopes in current market conditions.

Bankers who were not on the deal told IFR, which is also owned by Thomson Reuters, that Kenya may have to entice investors with a yield of 9 to 10 percent if it wants to borrow $2 billion. Even if it sought to borrow $1.5 billion, it could cost between 8.50 percent and 9 percent, said one banker.

Rotich declined to comment on how much Kenya intends to borrow and said it was difficult to judge the price of the bond as market conditions have worsened since last year.

"Yes, we are aware of the gradual tightening of markets," he said.

"But we cannot know the price until we start this process of roadshows and meeting investors and getting their indication about what rate they can lend to Kenya."

Kenya's initial debut Eurobond in 2007 was scuppered by post-election violence which crippled the economy and dented investor confidence.

One fund manager said Kenya should push ahead with the bond as a peaceful election last year and oil discoveries in its northern regions have fuelled optimism about the country's economic prospects.

"It is a favoured country in the eyes of investors at the moment," the fund manager said. "It has a good story to it."

However, not everyone was optimistic about Kenya's prospects of launching the bond under current market conditions. "I'll believe it when I see it," said one banker. (Additional reporting by Sudip Roy in London and Tosin Sulaiman in Johannesburg; Editing by Susan Fenton)

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