Investors in the Talanta bond that was used to build Raila Odinga stadium will receive Sh6.5 billion from July 7 on the back of Sh24.8 billion gambling taxes.
The government last year raised Sh44.79 billion through a 15-year bond whose returns are paid from betting taxes, which are housed under the Sports Fund.
This will be the first full year payment for the investors who received their first paycheck on January 7, of an estimated Sh3.25 billion.
Proceeds from gambling taxes under the Sports Fund are expected to increase 35.3 percent to Sh24.8 billion, up from Sh18.3 billion in the last financial year, making it easier for the State to settle the bondholders.
The Sports Fund is mainly funded by taxes and levies raised from the betting industry, with the fund targeting Sh2.07 billion per month, indicating the large spending by Kenyans in gambling.
‘This reflects the projected increase in appropriation in aid collections to the Sports, Arts and Social Development Fund (SASDF). The ministry of sports projects to collect Sh2.07 billion per month,’ said National Treasury Director of Budget Albert Mwenda.
‘This includes the amount to be set aside for the settlement of the loan linked to the Talanta Stadium loan.’
The investors will on July 7, receive Sh3.25 billion being the first coupon payment of the financial year, before the second payment on January 7 of Sh3.25 billion.
The money from gamblers is received daily by a fund manager who invests it before making the scheduled coupon payments. The payout to investors includes interest and investment income earned by the fund manager.
The securitisation managers, Liaison Capital, did not disclose the exact amount paid out to investors of the bond in January, as the amount will differ in each coupon payment based on the investment income.
The bond has a 15.04 percent rate of return, which will earn investors Sh57.6 billion in interest over the life of the bond.
The interest income from the bond is tax-exempt, giving it the same status as the government-issued infrastructure bonds.
As per the information memorandum, the government has an extra three-day window to make payments before it is considered to be in default, meaning it has an effective deadline of July 10 to make the payment.
The issuer of the bond, Liaison Group, through a special vehicle, Linzi FinCo 003 Trust, has arranged a standby letter of credit with KCB Bank to be used in case of delayed disbursements from Treasury.
Proceeds of the bond were directed to the completion of the 60,000-seater stadium, which has since been renamed Raila Odinga International Stadium.
As of last week, the stadium was 91 percent complete, as per a statement by the Ministry of Sports after a site tour.
As of April last year, the stadium was 37 percent complete, with the government having paid only five percent of the construction costs.
The contractor, China Roads and Bridge Corporation, had agreed to continue being active at the site as the government sought funds. The Ministry of Defence was given supervisory powers over the project owing to the army’s reputation for prompt execution.
However, monies used by the Ministry of Defence are difficult to audit due to the sensitivity of the docket.
The Raila Odinga Stadium is earmarked as one of the grounds to host the 2027 Africa Cup of Nations (Afcon).
The National Treasury has also set aside an additional Sh1.5 billion for preparations towards the Pamoja Afcon games, which Kenya will host alongside Uganda and Tanzania.
The budget includes Sh828 million as wages for temporary employees, underscoring the magnitude of the games and the manpower needed to execute.
Printing, advertising and information supplies have been allocated Sh200 million, while insurance costs have a Sh200 million budget.
An insurance contract, worth Sh42 million for the CHAN Pamoja games hosted by the three East African countries last year, is at the centre of corruption allegations against the top hierarchy of the Football Kenya Federation.
The Treasury has earmarked Sh271 million for other operating expenses relating to the games scheduled to take place between June 17 and July 19 next year.
The Raila Odinga Stadium will serve as a main venue for the opening and closing ceremonies, as well as matches of the Afcon games.
Notably, the Sports Fund’s 10-year tenure lapses in August 2028, a year after the games, clouding the payouts of the 15-year bond, with the government yet to issue guarantees of its renewal.
The Talanta bond did not have a government guarantee, with investors relying on the Public Finance Management Act, which establishes the Sports Fund, declaring the Treasury’s obligation to take up the liabilities of the fund if it is dissolved.