Kenya Could Lose Assets if It Defaults on KSh 44b Talanta Bond Debt
- President William Ruto rang the bell at the Nairobi Securities Exchange as Linzi Fico listed the Talanta Stadium bond
- The notification of the issuance of the bond noted the terms and how bondholders will recoup their investment
- The bond's issuer, Sports Fund, is legally obligated to provide investors with semi-annual returns for several years
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If the Sports Fund's term is not extended past 2028, Kenya faces asset seizures from the recently listed KSh 44.79 billion Talanta stadium-backed bond.
Source: Twitter
According to an investor notification that accompanied the bond's issuance, the state will be obliged to promptly reimburse bondholders for their money if the fund's term is not renewed, which will be characterised as a default of the 15-year-old bond.
NTV Kenya reported that bondholders have also been given the authority to recoup their investments by seizing assets connected to the Sports Fund.
The 60,000-seat Talanta Sports City stadium on Ngong Road is being built with the proceeds of the bond, which was oversubscribed.
"The failure to achieve an extension of the fund before its tenor lapses has been identified as an event of default. When the fund's winding up process begins, the notes will accelerate, making all outstanding sums immediately due and payable from the fund. Because the notes are a priority charge on the fund's assets, this risk is substantially reduced," the notice read.
How much will Kenya repay?
The bond's issuer, Sports Fund, is legally obligated to provide investors with semi-annual returns till 2040, with a total payout of KSh 102 billion, as reported by Business Daily.
However, because the government has not yet provided assurances of its renewal, the fund's 10-year term is set to expire in August 2028, casting doubt on the payouts.
The Sports Fund received KSh 10.6 billion from gamblers in the year ending June 2023, with the majority of its funding coming from taxes and levies collected from the betting industry.
The billions in betting proceeds are expected to be used by the fund to cover the bond's principal and interest.
Source: Twitter
What's the value of the Sports Fund's assets?
As of June 2023, the fund had KSh 5.6 billion in assets, including KSh 2.2 billion in property, plant, and equipment and KSh 3.3 billion in cash.
Talanta is part of Sports Kenya, a government agency that looks after the nation's athletic facilities.
This implies that the bondholders will not be able to seize the massive stadium, which is expected to cost KSh 32.3 billion, with the remaining billions going on ancillary facilities and infrastructure.
The transaction's advisers received KSh 1.4 billion.
How did Kenyans react to Talanta's cost?
President William Ruto oversaw the listing of the Linzi Finco bond at the Nairobi Securities Exchange (NSE).
Kenyans were divided over the announcement, with most voicing concerns about the cost and contrasting it with stadiums in other countries.
Talanta is the first major, purpose-built international stadium project in Kenya in 40 years.
Proofreading by Asher Omondi, copy editor at TUKO.co.ke.
Source: TUKO.co.ke
