New Sh50b infrastructure bond raises eyebrows

Market watchers have raised eyebrows over the speed with which the government is seeking to auction a 20-year Ksh 50 billion infrastructure bond, which was floated on Monday.

According to a prospectus by the Central Bank of Kenya, the deadline for bidding for the bond, the largest such offering since the first infrastructure bond was floated in 2009, is 2 pm on Tuesday, which the auction taking place on Wednesday.

This has raised questions regarding whether the government was motivated by anticipated high demand for the lucrative bond, which will carry a tax-free coupon of 11.9% p.a, or there is a target investor in mind.

“The purpose of the bond is for partial funding of infrastructure projects in roads, water and energy sectors. The bond will be tax-free as is the case for all Infrastructure Bonds as provided for under the Income Tax Act,” said CBK in the bond prospectus.

The last time the government floated such a bond in January this year, a 15-year infrastructure bond worth Ksh 40 billion with a coupon of 12.500% p.a, it gave a tenor period of seven days (January 16 to 23).

Here is the CBK prospectus: