CBK floats second infrastructure bond

by Morris Aron

The Central Bank of Kenya (CBK) has launched the second infrastructure bond.

The move is seen as a Government strategy to cash in on the huge appetite at the Nairobi Stock Exchange’s bond market that has resulted in oversubscriptions in the recent past.

CBK is inviting bids for an Sh18.5 billion ($248 million) 12-year issue, with a 12 per cent coupon rate.

Optimistic of a positive outcome, CBK said Sh5 billion would go towards the construction of new roads, Sh4 billion would fund refurbishment of civil works, while rural electrification schemes would get Sh1.5 billion.

In addition, geothermal energy resources and exploration would receive Sh3.5 billion, and a further Sh4.5 billion of the proceeds would fund water, sewerage and irrigation projects.

The launch follows the success of the debut infrastructure bond, issued ten months ago, that was 45 per cent oversubscribed.

Treasury is the biggest player in the Sh360 billion bonds market, of which, private corporations account for only about three per cent, Sh12 billion, of the outstanding offers. About 73 treasury bonds and 11 corporate ones are listed at the NSE.

Strong demand

The floatation comes at a time when a number of corporate and Government debt issues also attracted strong demand from the market, as investors seek more secure investment options, in the wake of dismal performance of the stock’s market and lukewarm economy.

Power generator, KenGen’s Sh15 billion Public Infrastructure Bond Offering (PIBO), floated recently, was oversubscribed by 77 per cent. KenGen raised a total of Sh26.6 billion. Telecommunication giant Safaricom’s first part of a Sh12 billion bond programme received applications worth Sh7.5 billion, against the Sh5 billion on offer.