Kenya Pipeline Company (KPC) Ltd is considering issuing a US dollar-denominated corporate bond to refinance part of the $350 million syndicated loan it secured from a consortium of banks two weeks ago.
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“We would consider issuing a bond depending on market conditions; but we would certainly explore it,” KPC chairman John Ngumi, told The EastAfrican.
Mr Ngumi, who was a member of the transaction advisory team for the syndicated loan by virtue of his position as Standard Bank’s head of investment banking in East Africa, said the bond market is more suitable once the construction of the pipeline is completed. Standard Bank owns CfC Stanbic bank, which handled the transaction.
“During the construction, it makes better sense to borrow from banks where there is flexibility to match drawdown to the project construction timetable than to go to the bond market, which typically requires one drawdown,” said Mr Ngumi. “This is an unsuitable structure since one would be paying interest on money one is not using immediately.”
A syndicated loan is money lent to a borrower by a group of banks that agree to spread out the risk of default.
If successful, the state-owned corporation will be the first Kenyan company to tap into the international debt market after the government issued its debut $2 billion sovereign bond that was oversubscribed four times last year.
The bond helped to benchmark Kenya’s credit status and to facilitate access to international capital markets by corporate entities.
KPC secured the $350 million syndicated loan a fortnight ago from a group of local and international banks namely Co-operative Bank of Kenya, CfC Stanbic, Citibank NA, Commercial Bank of Africa, Standard Chartered Bank and Rand Merchant Bank (a division of FirstRand Bank Ltd).
The loan will be used to fund 72 per cent of the $484 million pipeline project involving the replacement of the company’s 450 kilometre line 1 multi-product fuel pipeline from Mombasa to Nairobi. The balance of 28 per cent ($135 million) will be financed using the company’s internal resources. ■