Taxpayers pay dearly for syndicated loan National Treasury took in 2015

Taxpayers have paid dearly for a syndicated loan the National Treasury took in October 2015, at the height of a cash crunch in Government.

The country is estimated to have paid Sh6.5 billion in interests and fees for the $750 million (Sh77 billion) from a syndicate of lenders led by PTA Bank, and Eastern and Southern African Trade and Development Bank (TDB) based in Burundi.

Treasury paid an interest rate of 6.7 per cent plus a six-month libor (1.87 per cent) and a facility fee of 3 per cent for the seven-year loan.

The loan also attracted a $20,000 (Sh2 million) facility agency fee annually.

The loan, which matured last October, attracted additional charges of 0.15 per cent ($969,300) for the six-month roll-over to April this year despite the extension having been included in the contract.

“The contract had anticipated a possible roll-over, so I do not think there were extra costs and could, therefore, just be a premium on the extra months,” said a source familiar with the transaction but who sought anonymity.

However, some creditors refused to roll over some $103 million (Sh10.6 billion), forcing Treasury to turn to TDB to help settle the loan.

In the new loan arrangement, which will be used to settle the remaining Sh67 billion, TDB will finance the largest chunk of about $350 million (Sh36 billion) and then approach other banks for $400 million (Sh61.2 billion) as the lead arranger.

Lump sum

Unlike the October 2015 loan, which was paid in a lump sum, the new loan will be paid semi-annually until it matures, with a one-year grace period.

National Treasury Cabinet Secretary Henry Rotich said in November 90 per cent of the investors had agreed to a six-month extension of the syndicated facility.

The stock of Kenya’s external debt has risen to Sh2.3 trillion and is expected to rise to Sh2.4 trillion when Treasury issues a Eurobond in the first quarter of this year.

According to Reuters, the Government is also set to issue a $1.5 billion (Sh154 billion) Eurobond for 10 years by the first week of March, to take advantage of high demand for new issues.

In the last three years, Kenya has taken four syndicated loans. The first was in October 2015, which is being repaid by the current TDB loan, and two others in 2017.

TDB gave the Government $250 million (Sh25.8 billion) approved in December last year and then arranged an additional 10-year loan of $500 million (Sh51 billion) from Qatar National Bank, Emirates NBD and Afreximbank.

Treasury mandarins are under pressure to come up with mechanisms to raise cash since the servicing of the $3.8 billion Chinese loans borrowed to fund the Mombasa-Nairobi section of the Standard Gauge Railway is expected to begin this financial year.