LONDON (Reuters) - Kenya has doubled the size of its planned debut Eurobond to $1 billion with a tenor of at least 10 years and aims to complete the transaction in the 2013/14 fiscal year, the country’s finance minister told Reuters on Tuesday.
Proceeds of the bond will be used to finance infrastructure projects and to retire some of a $600 million syndicated loan signed in May with three international lenders, Robinson Githae said on the sidelines of an investment summit in London.
“We have now started preparations for the Eurobond,” he said. “At least $1 billion, a minimum of 10 years.”
Kenya’s initial plans to issue a $500 million Eurobond were delayed by post-election violence following a disputed 2007 presidential election and the global financial crisis.
Githae said elections next March were unlikely to deter investors, pointing to the successful loan placement.
“We’ve been buoyed by the success of the syndicated loan which was a test case,” he said. “We wanted to do two tranches but it was snapped up in one.”
Githae said the Eurobond would enable Kenya, East Africa’s largest economy, to reduce its domestic borrowing costs and eventually lower its debt-to-GDP ratio to 45 percent from 48 percent currently.
“This will assist us in reducing the domestic debt and externalising it,” he said. “External debt is cheaper.
Githae said the bond would be issued when market conditions were right.
The government also hopes to improve Kenya’s credit rating from B+ to an investment-grade BBB, he added, though this was not a prerequisite for the bond sale. Kenya is rated by Fitch and Standard & Poor’s.
Githae said a fall in inflation to single digits for the first time in 17 months was due to the central bank’s tight monetary stance, as well as declining food and oil prices.
Year-on-year inflation fell to 7.74 percent in July, from 10.05 percent in June, its lowest level in 17 months.
“Our target was for single digit inflation by September of this year,” he said. “We’ve achieved it earlier than targeted.”
Kenya was “not out of the woods yet”, however, because it has no control over oil prices.