Kenya accelerates debt repositioning with $415m Eurobond buyback

Officials confirmed that all valid tenders for the 7.25 per cent notes maturing in 2028 were accepted in full, while the 8 per cent amortising notes due in 2032 were accepted up to a capped level after demand greatly outstripped the amount Kenya planned to repurchase. Investors tendered far more 2032 notes than the government intended to buy back, prompting the use of a proration formula to allocate purchases.

Under the terms of the offer, holders of the 2028 bonds will receive $1,035 for each $1,000 of principal and those participating on the 2032 line will be paid $1,055 per $1,000, both plus accrued interest. Settlement of the buyback is scheduled for early March, after which the repurchased debt will be cancelled and removed from Kenya’s outstanding obligations.

The operation follows a successful dual-tranche Eurobond issuance earlier in February, through which Kenya raised $2.25 billion on international markets. Proceeds from this new issuance are being deployed to finance the buyback and to extend the average maturity of its external obligations, shifting a portion of the repayment burden into longer-dated instruments due in 2034 and 2039.

Finance authorities have characterised the transaction as proactive debt management that smooths out repayment pressures and reduces rollover risks associated with large bullet maturities. By exchanging shorter-dated debt for instruments with extended timelines, the government aims to create fiscal space and reduce the near-term strain on its balance sheet.

Kenya’s public debt has hovered at around 70 per cent of gross domestic product, a level that has drawn scrutiny from credit analysts and multilateral lenders, especially as the country seeks fresh financing arrangements after the expiry of a previous IMF programme. Officials have been engaged in discussions with the IMF for a new support programme to bolster foreign exchange reserves and support macroeconomic reforms.

The robust appetite for the buyback reflected strong investor confidence in Kenya’s credit story. Demand for the 2032 notes swamped the capped offer size by nearly threefold, indicating that holders were eager to exit those maturities, likely in exchange for the newly issued, longer-dated instruments with staggered amortisation features.

Despite positive signals from the latest transaction, Kenya continues to face structural challenges on its public finance front. Interest payments on external borrowings have been growing over time, and academic research has flagged how rising external debt servicing can weigh on economic growth when not matched by corresponding GDP expansion.

Policy makers contend that by spreading out debt maturities and reducing the concentration of repayments in narrow windows, the economy can better absorb obligations without compromising funding for key development priorities. The strategy aligns with a series of past liability management exercises in which Kenya has refinanced or repurchased older bonds after raising new capital at competitive rates.

Market analysts emphasise that the success of the buyback and new issuance underscores Kenya’s standing in international debt markets, where sovereigns from Sub-Saharan Africa must compete for limited investor dollars. The ability to tap capital at acceptable yields and meet tender specifications is viewed as an affirmation of credit access, notwithstanding elevated debt levels.

The government’s approach also signals to other borrowers in the region — such as neighbouring Uganda, Tanzania and Rwanda — that disciplined debt management and clear refinancing paths can bolster market reception even as regional economies pursue infrastructure and industrial investment agendas.