Kenya Dumps Eurobond Buyback Plan, to Pay $2 Billion in June

Kenya abandoned a plan to buy back a portion of a $2 billion eurobond, sidestepping a potential default on the terms of the debt, which mature in June.

The East African nation paid $68.7 million in interest on the bond, which “underscores Kenya’s steadfast dedication to meeting external obligations,” Cabinet Secretary Njuguna Ndung’u said in an emailed statement Thursday. The government will pay the principal on maturity, according to the statement, which didn’t mention anything about its pledge to repurchase $300 million of the notes.

President William Ruto’s government backed away from the plan to repurchase early — meant to allay investor concerns about its ability to pay — as some money managers and credit assessors raised concern that the move could be seen as a technical default.

“The final interest payment on this eurobond is scheduled for the last week of June 2024, alongside the repayment of the principal amount of $2 billion,” Ndung’u said.

Ruto initially announced the plan to buy back as much as half of the debt, but government officials reduced the target to $500 million, and then $300 million, which some investors say sends mixed signals.

“The inconsistency in the messaging is concerning,” said Thato Mosadi, a fixed-income strategist at Jefferies. “However, we remain confident about the future trajectory of multilateral inflows that will help Kenya settle its outstanding principal on the 2024 eurobond.”

The yield on the notes due June 2024 was 13.36% by 19:07 p.m. in Nairobi, the lowest since Nov. 22. Yields have dropped for three consecutive days, the longest streak since Nov. 21.