TDB Bank May Arrange $1 Billion Syndicated Loan for Kenya

(Bloomberg) -- Kenya approached the Trade and Development Bank for a syndicated loan to pay off five-year Eurobonds maturing in 2019, according to a person familiar with the arrangement.

The government is said to target between $800 million and $1 billion and seeks a tenor of at least seven years, the person said. Kenya’s $750 million of Eurobonds mature in June. Treasury Secretary Henry Rotich didn’t answer calls or text messages seeking comment. A TDB spokesman declined to comment, saying the bank would issue a statement later Friday.

Unlike Eurobonds, syndicated loans are considered easier and quicker to arrange because the government requires neither a prospectus nor a roadshow, and has no obligation to disclose the terms to the public.

For that convenience, the loans are usually more expensive. Kenya contracted a two-year $750 million syndicated loan in 2015 at an effective yield of 8 percent, according to International Monetary Fund data. In comparison, the nation’s five-year Eurobonds issued in 2014 were priced at 5.875 percent and traded at 6.035 percent by 12:30 p.m. in Nairobi, the capital.

The TDB arranged five of nine syndicated loans to East Africa’s biggest economy since 2015, according to disclosures made in a Eurobond prospectus in February. The Treasury intends to raise 280 billion shillings ($2.73 billion) in external borrowing to finance its 2018-19 budget by issuing Eurobonds, a syndicated loan or green bonds.

Focus on Kenyan debt has intensified since it more than doubled in the past six years to 5.15 trillion shillings. The IMF, which warns the borrowing has raised fiscal vulnerabilities and increased interest payments, revised last month Kenya’s risk of debt distress to moderate from low.

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