The government of Kenya infrastructure bond closes on Wednesday and looks to be a successful fully subscribed offer that will raise Kshs. 18.5 billion (~$231 million).
It will have proved irresistible to funds and institutional investors who have been looking for investment outlets as the Nairobi Stock Exchange slump persists, and the sure 12.5% annual return from the Government of Kenya over the next 12 years is a sure bet. The 12.5% interest payments will be paid semi annually with principal repaid in 2015, 2017 and 2021. Bonds from Mabati and Barclays were fully subscribed in 2008
Through the minimum investment is just Kshs. 100,000 (~$1,250) it looks like there’s little interest from retail investors, with many smarting from the free-falling NSE and more concerned with protecting their existing investments (read these great tips) from rogue stockbrokers to sign up for bond which, the fire-fighting Capital Markets Authority (CMA) has not gotten round to providing much investor education. The short window (about 3 weeks from Jan 28 to Feb. 18) may also not have favored retail investors.
The success of the bond which is earmarked for road, geothermal and water projects comes despite some reservations (little infrastructure spending identified, limited oversight, may affect Kenya’s credit rating). The bond was first set out in the 2008 budget by the Minister of Finance.
Read more bond perspectives from the Kenya Capital Investment Group blog
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