Dave Kihianyu

Securitisation Reading through the Offering Memorandum (OM) for the Linzi 003 Infrastructure Asset-Backed Securities (IABS) Programme—which facilitated a landmark KES 44.79 billion structured debt transaction to finance the construction of the Talanta Sports Complex ahead of the AFCON 2027 tournament—I am not surprised the IMF is insisting that funds raised through securitisation deals be fully disclosed in our national debt book. Here is a direct quote from the OM: "Upon the winding up of the Fund, and subject to approval by Parliament, the National Government, through the National Exchequer Account, shall assume and discharge all outstanding amounts under the Notes." Several other points are worth noting: Commercial Finance vs. Public Ring-Fencing: While celebrated in capital markets as a pioneering 15-year, tax-exempt asset-backed listing yielding 15.04% per annum, a closer examination of the underlying legal framework reveals a structure that relies on ring-fencing public funds rather than traditional, commercial project finance. Asset-Backed in Name Only: Despite being branded as an Infrastructure Asset-Backed Security, the notes are not backed by revenues generated from the Talanta Sports Complex itself (such as ticket sales, broadcasting rights, or corporate sponsorships). Instead, the debt is collateralised by the Sports, Arts and Social Development Fund (SASDF)—a statutory fund fed by public betting taxes and exchequer allocations. Fiscal Implications: The transaction encumbers a major public development fund for 15 years, maturing in 2040. Incoming betting tax revenues will be diverted to pay private noteholders, starving grassroots sports, healthcare initiatives, and cultural programs of vital funding. The Illusion of Limited Recourse: Page 1 of the OM explicitly labels the notes as "limited recourse instruments," asserting that noteholders have no claim beyond the Trust’s assets. Yet, while private investors and arrangement syndicates enjoy a high, tax-free yield of 15.04%, the ultimate credit risk is quietly transferred back to the Kenyan taxpayer should the Sports Fund default or undergo statutory restructuring. Off-Balance-Sheet Financing: By routing the transaction through an unincorporated private trust (Linzi FinCo 003 Trust) and assigning receivables via Sports Kenya, the KES 44.79 billion liability is kept off the central government’s primary balance sheet. An Emerging Pattern: Similar to the OAK SPV Road Maintenance Levy Fund securitisation (KES 156.97 billion), the National Treasury is increasingly turning to off-balance-sheet Special Purpose Vehicles (SPVs) to fund national infrastructure. This pattern locks up future state revenues without adding to official sovereign debt tallies or undergoing standard parliamentary debt-cap oversight