The east Africa sovereign is issuing two tranches of amortising dollar bonds with a weighted average life (WAL) of seven years and 12 years respectively. The plan was originally for 12 year and 31 year notes but following a roadshow, the longer tranche was replaced with a seven year clip.
JP Morgan and Standard Chartered are arranging the deal.
Kenya’s outstanding bonds due 2024 trade around a Z-spread of 425bp, its 2028s at 520bp over and its 2048s at 601bp over.
Initial guidance for the seven year was set at mid-7% area and for the 12 year at mid-8% area. That guidance was later updated to 7.25% area and 8.25% area respectively.
When initial guidance was released, an investor said that a yield of 7.5% for the seven year would imply a Z-spread of 524bp and 8.5% for the 12 year a Z spread of 608bp. The note is expected to be printed later on Wednesday.
“It looks quite attractive compared to the outstanding bonds,” said another emerging markets investor in London.
The first investor agreed, adding that Kenya had “left some juice on the table to get the deal across the line”.
He said both tranches were attractive, but he favoured the seven year. He said he expects the seven year to print around a yield of 7.125% and the 12 year at 8.125% and that they could trade well, with investors benefiting from a rally in Kenya bonds anticpated if an IMF deal for a new standby-loan facility for the country is agreed shortly, as is expected.
Kenya is rated B+ by both Standard & Poor’s and Fitch.
The country has a $750m 5.875% bond that matures in June. The second investor said that the generous guidance may be because the country is under time constraints to refinance that debt.
The new seven year WAL bond has a final maturity in May 2027 and has amortisation dates in 2025 and 2026. The bond with the 12 year WAL has a final maturity in May 2032 and has amortisation dates in 2030 and 2031.
The borrower’s last trip to the market was in February 2018, when it printed $1bn each of 10 and 30 year bonds.