Infrastructure Bond IFB1/2011/12 - September 2011 - myStocks: Opinion and Commentary

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Infrastructure Bond IFB1/2011/12 - September 2011

By Cannon Asset Managers (Cannon Asset Managers)
Comments Saturday, October 01, 2011 at 2:55 PM EAT

The Central Bank of Kenya proposes to issue a new Infrastructure Bond IFB1/2011/12 on 3rd October 2011. The features of the bond are:

 Issue Date:3rd October 2011 
 Coupon Rate:12.00%
Principal Redemption:3 Installments as under
  • 28th September 2015: 44.01% (Year 4)
  • 23rd September 2019: 32.66% (Year 8)
  • 18th September 2023: 23.33% (Year 12)
Maturity Date:
  • Final Maturity – 18th September, 2023 (12 years) 
  • Weighted Average Maturity – 25th November, 2018 (7 years, 2 months)

The interest on the Infrastructure Bond, like the previous 4 issues, will be tax-free in the hands of the investors – there will be no withholding tax, and no final tax is payable on the interest income earned from the bond.

This is the 5th Infrastructure Bond being issued by the CBK. The previous 4 issues outstanding are:

BondIssue DateCoupon RateFinal MaturityAmount Outstanding – KES mn

The advertised amount for the IFB is KES 20 bn; we believe that the CBK (and Treasury) will accept as much as they receive in bids at the auction, rejecting only that which is quoted at outrageous rates. Our recommendation is for bidders to seek a step-up of 300 – 400 basis points above the latest Treasury Bill rates for this paper. For investors who are currently in cash, we would recommend allocation of 40-50% of the available funds in this bond. 



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