Kenya initiates Ksh 64.5B Eurobond buyback ahead of new Global debt issue

The Government of Kenya has announced a plan to buy back up to $500 million (approximately KSh 64.5 billion) of its outstanding Eurobonds.

The offer, revealed in filings published by the London Stock Exchange, is part of a broader liability management strategy. The National Treasury intends to retire high-interest debt before launching a fresh U.S. dollar-denominated bond issuance to tap into improving investor appetite for emerging market credit.

The buyback specifically targets two existing notes:

The 7.25% notes due 2028: Kenya is offering to repurchase up to $150 million of this paper.
The 8.0% amortizing notes due 2032: The government has capped the buyback for these notes at $350 million.

To incentivize investors, the government is offering to purchase the bonds at a premium. Holders of the 2032 notes will receive $1,055 per $1,000 of principal (105.5%), while holders of the 2028 notes are offered $1,035 per $1,000 (103.5%), plus accrued interest in both cases.

By retiring these bonds now, the Treasury aims to reduce the total amount of commercial debt due in the coming years and lower the burden of interest payments.

Government officials have stated that the accepted bonds will be cancelled and permanently retired, which will effectively improve Kenya’s debt maturity profile. This proactive stance is intended to signal to international markets that Kenya is committed to fiscal sustainability.

The buyback is not unconditional. It is contingent upon the successful placement of a new U.S. dollar bond. This switch strategy is a common tactic for sovereigns looking to extend their repayment timelines.

To ensure the success of the new issuance, the Treasury is offering priority consideration in the allocation of the new bonds to investors who participate in the buyback. This creates an incentive for institutional holders to rollover their positions into Kenya’s newest debt instrument.

The success of this dual operation, the buyback and the new issuance, will serve as a major litmus test for Kenya’s standing in the global financial system and its ability to manage its Ksh. 10 trillion+ debt ceiling in a high-interest-rate environment.