Kenya to list bond internationally, AccessKenya IPO

Although minuscule in comparison to normal paper being floated in the international markets, the fact that Kenya is thinking of venturing into the international bonds market is worth a mention. Before that, what, why and how-type questions will be asked. How are bonds listed internationally? What is the rationale for raising funds internationally? Why not continue raising funds internally-after all there is plenty of liquidity in our economy?

• It is to help maintain domestic interest rates and insulate the private sector from the crowding out effect e.g. banks preference for buying t-bills instead of lending
• To increase marketability and liquidity of govt bills-the flip side is that the type of investor who will buy these will be hot money taking to the hills at the slightest sign of risk. It does however mean that the risk of default is reduced by entrenching a tighter monetary policy so no more 1993 level of interest rates...
• To create a benchmark for our corporates to raise funds in the same way e.g. KenGen who need to fund more electricity generation projects
• To raise the profile of our economy-my favorite one as Kenya would get a credit rating from the likes of S&P, Moodys and so forth and would get a regular SWOT analysis of its economy
• Typically international bonds are long-held and used to finance big infrastructure projects e.g. roads
• Is it to raise funds away from domestic eyes/pressure-quite clearly this is a real issue as you may not necessarily budget for it?

AccessKenya IPO kicks off tomorrow and I believe it will be oversubscribed given the size of the issue and despite the careful choreography of allocations. Is it worth investing in though. AK has 32% of the corporate market, and will be re-investing just over half of the raised funds into VOIP and other residential related products. There is also talk that it will be looking for some bolt-on acquisitions perhaps aimed at improving its retail offering. Numbers-wise, yes revenue and PAT have grown but an EPS of 0.47 for FY2006 would be among the lowest on the NSE. If you want to go long-term, the elephant in the room will Kenya Telecom, if you are a speculator, you need to ask yourself who will come into the secondary market given Institutionals are being catered for.

I keep wondering, our neighbour Ethiopia has a population of 80m, and yes they are mainly involved in agriculture, but why aren't more Kenyan companies (apart from Kenol) moving in?

I guess next time the WB president meets some Kenyan politician, they will have some common conversation topics along the lines of "I know I am supposed to non-corruptable, but I am human, right?"...