Linzi FinCo lists KSh 44.79B IABS on NSE 

In a significant move set to redefine infrastructure financing in East Africa, Linzi FinCo 003 Trust, a dynamic subsidiary of the prominent Pan-African Liaison Group, has successfully listed a monumental KSh 44.79 billion Infrastructure Asset-Backed Security (IABS) on the Nairobi Securities Exchange (NSE). This landmark transaction is poised to inject crucial capital into the development of the highly anticipated Talanta Sports City, a cornerstone project for Kenya’s aspirations to host the Africa Cup of Nations (AFCON) in 2027.

The listing of this bond represents a sophisticated blend of domestic capital mobilization and cutting-edge financial engineering, showcasing Kenya’s growing maturity in capital markets. It underscores a strategic pivot for Linzi FinCo, building on its groundbreaking 2024 Sukuk issuance, which successfully raised KSh 3 billion for the financing of 3,069 affordable housing units. This latest venture scales the firm’s ambition, aligning its financial prowess with national development priorities and the broader Sustainable Development Goals (SDGs).

The Vision Behind Talanta Sports City: A National Imperative

At the heart of this colossal bond issuance lies the Talanta Sports City project. More than just a collection of sporting facilities, Talanta Sports City is envisioned as a world-class integrated sports complex designed to elevate Kenya’s athletic infrastructure and serve as a vibrant hub for sports, entertainment, and commerce. Its primary immediate purpose is to be an anchor facility for Kenya’s joint bid with Uganda and Tanzania to host the prestigious AFCON 2027 tournament, a continental football spectacle that promises immense economic and social benefits for the host nations.

The development of Talanta Sports City is expected to encompass:

• State-of-the-art Stadiums: Including a main stadium compliant with FIFA and CAF international standards, capable of hosting major tournaments.
• Training Facilities: Modern pitches, gymnasiums, and specialized training centers for various sports disciplines.
• Athlete Accommodation: Dedicated housing and amenities for athletes and visiting teams.
• Commercial and Hospitality Zones: Hotels, retail outlets, restaurants, and entertainment venues to create a self-sustaining ecosystem and attract visitors.
• Infrastructure Upgrades: Improved road networks, public transport links, and utility services to support the complex.

For Kenya, hosting AFCON 2027 is not merely a matter of sporting pride; it’s a strategic economic play. Such a mega-event promises:

• Tourism Boost: A massive influx of international visitors, boosting the hospitality, transport, and retail sectors.
• Job Creation: Significant employment opportunities during construction and operation, from skilled labor to service industry roles.
• Infrastructure Development: Accelerating critical infrastructure projects beyond the sports city itself, benefiting the wider economy.
• International Profile: Enhancing Kenya’s global standing as a capable host of major international events and a prime investment destination.
• Sports Development: Inspiring a new generation of athletes and fostering a stronger sports culture within the country.

The Talanta Sports City project aligns seamlessly with Kenya’s ambitious Vision 2030, the country’s long-term development blueprint aimed at transforming Kenya into a newly industrializing, middle-income country providing a high quality of life to all its citizens by the year 2030. Infrastructure development, including sports and tourism infrastructure, is a key pillar of this vision.

Linzi FinCo’s Pioneering Journey in Structured Finance

Linzi FinCo’s latest IABS issuance is a testament to its innovative approach to financing critical development projects. The firm, fully owned by renowned Kenyan banker Tom Mulwa, specializes in capital markets structuring, Islamic finance, pensions, and investment services. Its journey into large-scale infrastructure financing follows its successful foray into Islamic finance in 2024 with Kenya’s first Islamic Sukuk.

A Sukuk is an Islamic financial certificate, often referred to as “Islamic bonds.” Unlike conventional bonds, which represent a debt obligation, Sukuk represents an undivided beneficial ownership interest in a pool of underlying tangible assets, projects, or services. This structure adheres to Sharia principles, which prohibit interest (riba) and speculative transactions. Instead, Sukuk holders receive a share of the profits generated by the underlying assets. Linzi FinCo’s pioneering Sukuk for affordable housing demonstrated its capacity to tap into diverse investor pools and deliver socially impactful projects under ethical financing frameworks.

The pivot from affordable housing to large-scale infrastructure reflects a strategic deepening of Linzi FinCo’s impact. This move is directly aligned with national development goals, particularly those articulated in Kenya’s Vision 2030, and the United Nations’ Sustainable Development Goals (SDGs). Specifically, this bond contributes significantly to:

• SDG 9: Industry, Innovation, and Infrastructure: By financing resilient infrastructure, promoting inclusive and sustainable industrialization, and fostering innovation.
• SDG 11: Sustainable Cities and Communities: By helping to make cities and human settlements inclusive, safe, resilient, and sustainable through improved infrastructure.
• SDG 8: Decent Work and Economic Growth: By creating employment opportunities and fostering economic activity through large-scale projects.

This strategic alignment not only enhances the social and environmental credentials of Linzi FinCo’s offerings but also appeals to a broader range of investors, including those with mandates for impact investing and ESG (Environmental, Social, and Governance) considerations.

Unpacking the Bond’s Core Terms: An Investor’s Perspective

The Linzi 003 IABS is meticulously structured to offer attractive returns and robust investor protections. It is a senior secured, dematerialized medium-term note with a 15-year tenor, maturing in July 2040.

Let’s break down these key terms for clarity:

• Senior Secured: This means that in the event of default, bondholders have a higher claim on the issuer’s assets (specifically, the future revenues from Talanta Sports City) compared to junior creditors. This provides a significant layer of security for investors.
• Dematerialized: The bond exists purely in electronic form, eliminating physical certificates. This streamlines trading, reduces administrative costs, and enhances security.
• Medium-Term Note (MTN): This refers to a debt instrument that typically has a maturity period ranging from 1 to 10 years, though in this case, 15 years extends beyond the typical range, indicating a long-term commitment.
• 15-year Tenor (due July 2040): This long maturity period provides long-term capital for the infrastructure project, which by nature requires extended financing horizons. For investors, it offers a stable, long-term income stream.

Investors in Linzi 003 are set to earn an attractive internal rate of return (IRR) of 15.04% per annum, based on the issue price. This IRR is highly competitive within the Kenyan market, especially when compared to typical returns on government Treasury bills or bank deposits. For instance, while Kenyan Treasury bills might offer varying rates depending on the tenor, a 15.04% IRR on a 15-year infrastructure bond presents a compelling proposition for investors seeking higher yields with a relatively stable risk profile given the asset-backed nature.

Repayments to investors will occur on an amortized basis with semi-annual redemptions every January 8 and July 8, beginning in January 2026. Amortized repayment means that a portion of the principal, along with interest, is paid back regularly over the life of the bond, rather than the entire principal being repaid at maturity. This provides investors with consistent cash flow and reduces the principal outstanding over time, lowering the overall risk.

The bond’s core terms are summarized as follows:

Allotment Incentives and Investor Confidence

Linzi FinCo strategically structured this issuance to incentivize early participation, a common practice to ensure rapid subscription. Applicants within the first five days of the offer were automatically guaranteed at least 50% of their desired allocation, with remaining amounts distributed on a pro-rata basis. This mechanism rewards proactive investors and helps build momentum during the offer period.

The success of this strategy was evident in the overwhelming response: the issuance, which closed on June 30, 2025, achieved an impressive 100.19% subscription rate. This oversubscription is a powerful signal of strong investor confidence, not only in the bond’s structure and the underlying Talanta Sports City project but also in the broader Kenyan economy and its infrastructure development trajectory. It indicates robust market liquidity and a keen appetite among both institutional and individual investors for well-structured, high-yield opportunities.

Tax Advantages and International Appeal

One of the most attractive features of Linzi 003 is its highly favorable tax status, designed to maximize investor returns and broaden its appeal:

• Interest income is exempt from withholding tax.
• Transfers incur no capital gains tax.
• No stamp duty applies on issuance or redemption.

These tax exemptions significantly enhance the net returns for investors, making the bond particularly appealing. Furthermore, Kenya’s extensive network of double taxation treaties with key countries like the UK, UAE, India, and South Africa further enhances the bond’s attractiveness to international investors. These treaties prevent investors from being taxed twice on the same income (once in Kenya and once in their home country), thereby simplifying cross-border investment and increasing the effective yield for foreign participants. This global appeal is crucial for mobilizing the vast sums of capital required for large-scale infrastructure projects.

Robust Investor Protections and Credit Quality

The AA(KE)(IR) rating assigned by GCR Ratings affirms the note’s strong credit quality. GCR Ratings is a leading credit rating agency in Africa, providing independent credit ratings that help investors assess risk. An “AA” rating in the Kenyan context signifies a very high credit quality, indicating a very low expectation of default risk. The “(IR)” suffix typically denotes an infrastructure rating, confirming its specific application to this asset class. The “stable outlook” further suggests that GCR expects the credit quality to remain consistent in the foreseeable future.

To further safeguard investor interests, Linzi FinCo has incorporated robust protection mechanisms:

• An escrow account: This dedicated account is set up to manage repayments, ensuring that funds generated by the Talanta Sports City project are channeled directly to bondholders. It segregates the project’s revenues from the issuer’s general operating funds, providing an additional layer of security and transparency.
• A standby liquidity facility: This mechanism acts as a financial safety net, providing a source of funds to cover unforeseen shortfalls in cash flow that might temporarily impact repayments. This enhances market confidence by mitigating short-term liquidity risks and assuring investors of consistent cash flow.

These protections are critical for an asset-backed security, where the performance of the underlying asset directly impacts the bond’s viability.

Seamless Offer Execution and Settlement

The execution and settlement process for the Linzi 003 IABS was designed for efficiency and transparency:

• Receiving Bank: KCB Bank Kenya (Moi Avenue Branch) served as the receiving bank, handling the collection of investor funds. KCB Bank is one of Kenya’s largest and most reputable financial institutions, lending credibility to the process.
• Placement Agents: CPF Financial Services and KCB Investment Bank acted as placement agents, responsible for marketing the bond to potential investors and facilitating their subscriptions. Their expertise was crucial in achieving the oversubscription.
• Payment System: The Real-Time Gross Settlement (RTGS) system was utilized for payment, ensuring that large-value transactions were settled individually and immediately, minimizing settlement risk.

The key dates for the bond were:

• T+48 (Settlement): This means settlement occurred 48 hours after the transaction date (T).
• T+49 (Listing): The bond was officially listed on the NSE 49 hours after the transaction date.
• T+66 (Trading Commences): Trading on the secondary market began 66 hours after the transaction date, allowing investors to buy and sell the bond.

All investors are required to hold a CDS account under the NSE’s Restricted Fixed Income Securities Market Sub-Segment (RFISMS). A CDS (Central Depository System) account is an electronic account that holds securities on behalf of investors. The RFISMS is a specialized segment of the NSE designed for fixed-income securities that may have specific eligibility criteria for investors or trading rules, ensuring that only qualified investors participate, which can add to market stability and investor protection for complex instruments like IABS.

The Pan-African Vision of Liaison Group

Linzi FinCo is the financing arm of The Liaison Group, a distinguished pan-African financial services firm established in 1981. With over four decades of experience, the group has grown into a formidable player in the African financial landscape. Fully owned by Kenyan banker Tom Mulwa, The Liaison Group’s extensive portfolio includes not only capital markets structuring but also a strong presence in Islamic finance, pensions, and a wide array of investment services.

The group’s commitment to innovation and regional development is evident in its pioneering role in Kenya’s Islamic finance sector, having issued the country’s first Islamic Sukuk. This deep expertise across various financial disciplines positions Linzi FinCo uniquely to structure complex, large-scale financing solutions that meet the evolving needs of African economies. Their pan-African reach suggests a broader ambition to replicate such successful models across the continent, addressing the significant infrastructure deficit that many African nations face.

Broader Impact and Future Outlook for Kenya’s Capital Markets

The Linzi FinCo IABS for Talanta Sports City is more than just a single transaction; it sets a powerful precedent for future infrastructure financing in Kenya and potentially across East Africa.

• Addressing Infrastructure Deficit: Kenya, like many developing nations, faces a substantial infrastructure deficit. Traditional government funding and foreign aid alone are insufficient to meet these needs. Innovative financing models like IABS are crucial for mobilizing private sector capital to bridge this gap, ensuring that critical projects are delivered efficiently.
• Multiplier Effect: The investment in Talanta Sports City will have a significant multiplier effect on the local and national economies. Beyond direct construction jobs, it will stimulate growth in supporting industries such as hospitality, retail, transport, and logistics. The long-term operation of the sports city will create sustained employment and business opportunities, fostering a vibrant economic ecosystem.
• Deepening Capital Markets: The successful listing and oversubscription of such a large and complex bond enhance the depth and sophistication of Kenya’s capital markets. It demonstrates the market’s capacity to absorb large issuances and provides a template for other public and private entities seeking to finance major projects through structured finance. This can attract more foreign direct investment and encourage local savings to be channeled into productive investments.
• Showcasing Financial Innovation: Linzi FinCo’s repeated success with innovative instruments (Sukuk, IABS) positions Kenya as a leader in financial innovation within the region. This can inspire other African nations to explore similar financing models, ultimately contributing to broader continental development.

Looking ahead, the success of the Linzi 003 bond will be closely watched. Its performance will serve as a benchmark for future infrastructure-backed securities, potentially paving the way for a new era of private sector-led infrastructure development in Kenya. The long-term vision is one where robust capital markets actively contribute to national development, creating jobs, fostering economic growth, and improving the quality of life for citizens.

Conclusion: A New Era of Infrastructure Financing

The listing of Linzi FinCo 003 Trust’s KSh 44.79 billion Infrastructure Asset-Backed Security marks a pivotal moment for Kenya’s economic landscape. It is a testament to the country’s growing financial sophistication and its commitment to leveraging innovative capital market solutions for national development. By channeling significant private investment into the Talanta Sports City project, this bond not only propels Kenya’s AFCON 2027 ambitions but also lays a robust foundation for future infrastructure growth, job creation, and sustainable economic prosperity. This is more than just a bond; it’s a blueprint for the future of financing development in East Africa.

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Photo source: Google

By: Montel Kamau

Serrari Financial Analyst

14th July, 2025