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Overview of the Talanta Stadium Bond
The Nairobi Securities Exchange witnessed a significant event when President William Ruto rang the bell, marking the listing of the Talanta Stadium bond by Linzi Fico. This bond has sparked considerable interest and debate, particularly due to its financial implications for Kenya.
Terms and Conditions of the Bond
The bond’s issuance included detailed terms that outlined how bondholders would recoup their investments. The Sports Fund, as the issuer, is legally obligated to provide semi-annual returns to investors for several years. These returns are crucial for maintaining investor confidence and ensuring the bond’s success.
If the Sports Fund’s term is not extended past 2028, Kenya could face asset seizures related to the recently listed KSh 44.79 billion Talanta stadium-backed bond. An investor notification accompanying the bond’s issuance stated that the state would be obliged to reimburse bondholders promptly if the fund’s term is not renewed, which would be considered a default of the 15-year-old bond.
Asset Seizure and Default Risk
NTV Kenya reported that bondholders have also been given the authority to recoup their investments by seizing assets connected to the Sports Fund. This provision adds an element of risk for the government, as it highlights the potential consequences of failing to extend the fund’s term.
The 60,000-seat Talanta Sports City stadium on Ngong Road is being built with the proceeds of the bond, which was oversubscribed. However, 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.
Financial Obligations and Repayment
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. 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.
Assets and Financial Status
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, highlighting the complexity and scale of the financial arrangements involved.
Public Reaction and Concerns
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.
This development has raised questions about the economic viability and long-term impact of such large-scale projects on the national budget and public finances. The debate continues as stakeholders assess the benefits and risks associated with the Talanta Stadium bond.
