Expression of Interest For Legal Assessment For Project Oak Infrastructure Bond Kenyan Law Kes Bond

Expression of Interest for Legal Assessment for Project Oak Infrastructure Bond Kenyan law KES bond From 2010 and up until the onset of the COVID-19 pandemic, Kenya seized opportunities presented by the global low-interest environment to invest in its infrastructure[1]. To finance these investments Kenya drew on public and foreign savings resulting in wider fiscal and current account deficits. The construction and public sector driven boom, however, generated limited growth and jobs dividends. At the same time, because of the accumulation of pending bills and arrears by the government, domestic firms and suppliers experienced cash flow issues contributing to rising nonperforming loans (NPLs) in the banking sector, which reached 17.2 percent by February 2025. At the same time, the need to respond to development needs and unlock private capital at scale subsists, and with improved local interest rates and a more stable foreign exchange rate, the opportunity for capital market development and leveraging securitization as a tool to mobilize private capital and accelerate development efforts in a responsible and sustainable manner is a logical choice. Kenya Roads Board (KRB) a state agency incorporated under the Kenya Roads Board Act, is tasked to fund, oversee and coordinate road maintenance, rehabilitation and development. KRB has significant outstanding arrears and unpaid bills to the private sector companies operating in the roads and construction sector. These pending obligations have led to widespread suspension of infrastructure works, affecting livelihoods, road users, and resulting in loss of jobs due to the inability of the companies to retain their workers and significant delinquency on the part of these private companies to the banking sector[2]. These factors triggered the need for an innovative approach to raise the necessary financing to bridge the financing gap and reduce the outstanding arrears to private companies. The KRB is funded by a road maintenance levy that is collected from oil importers by the Kenya Revenue Authority pursuant to the Roads Maintenance Levy Fund Act (RMLF Act). This levy is transmitted directly to KRB rather than being channelled through the consolidated fund, the central and main revenue collection account for the Government of Kenya. The KRB then applies the funds to various implementing agencies to finance road projects as prescribed under the KRB Act. The levy has been in existence since 1993, and its exclusive use is for road maintenance and rehabilitation. Project Oak is an innovative transaction that is structured to provide liquidity to KRB to pay down outstanding arrears to road contracting companies. The transaction is structured as a securitization of a portion of the future road maintenance levy payable to KRB, raising funds from banks through bridge facilities provided by Kenyan banks which will be refinanced by a bond issued on the capital market. KRB has elected to securitize a portion of the future road maintenance levy to allow it to pay contractors promptly and revive suspended projects[3]. The transaction involves the sale of KES 7 of the KES 25 per litre of the Levy collected every week (about 28%) for the next ten years from February 2025 to an SPV named Oak SPV Asset Co Limited. The plan is for the SPV to raise Kes 174.4bn (USD 1.35 billion) of financing on the back of the income on this stream of receivables. The transaction is a true sale securitization, i.e. the SPV will only have recourse to the purchased receivables and no further recourse to the KRB or the Government of Kenya (GoK) and therefore is ring-fenced outside the balance sheet of GoK. The transaction will raise the KES 174.4 billion, (USD 1.35 billion) in two phases, bridge loan facilities followed by a bond issuance. An initial tranche of the bridge financing of USD 324 million was raised earlier in 2025 and a further USD 302 million syndicated loan is expected to close by end of September 2025. A domestic capital market bond issuance will follow with intended participation by local pension funds, insurance companies and banks and potential participation by non-professional investors The bond issuance will be structured as an asset-backed securities programme (the "Programme"), whereby OAK SPV Assetco Limited (the "Issuer") may issue limited recourse, secured, senior and subordinated, registered and dematerialised notes (the "Notes") denominated in Kenya Shillings and United States Dollars, on the terms and conditions (the "Terms and Conditions") contained in the Programme Memorandum entitled "Terms and Conditions of the Notes". Before the Issuer issues any Tranche of Notes, the Issuer shall complete an Applicable Pricing Supplement based on the pro forma Applicable Pricing Supplement included in the Programme Memorandum, setting out details of such Notes. The Applicable Pricing Supplement in relation to any Tranche of Notes may specify other terms and conditions (including additional definitions) which shall, to the extent so specified or to the extent inconsistent with the Terms and Conditions, replace or modify the Terms and Conditions for the purpose of that Tranche of Notes. The Programme Memorandum will apply to all Notes issued under the Programme in an aggregate Outstanding Principal Amount which will not exceed KES 174 billion, unless such aggregate Outstanding Principal Amount is increased as set out in the Programme Memorandum. [1] Beyond the Budget, Fiscal Policy for Growth and Jobs, Public Finance Review for Kenya, World Bank 2025. [2] Transport and communication Banking Sector Gross NPLs/Gross Loans amounted to 15.3% of outstanding loans at the end of 2024. Source: Central Bank of Kenya Annual Supervision Report, Page 48. [3]. The levy has been collected since the Road Maintenance Levy Fund was established by an Act of Parliament in 1993. The Road maintenance levy fund is ring-fenced with the specific purpose of raising financing for the road sector and the use of proceeds of the securitization, to pay pending bills, aligns with the funds mandate. Tender Link : https://wbgeprocure-rfxnow.worldbank.org/rfxnow/public/advertisement/6382/view.html

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