Talanta Stadium: Why Kenya Faces Risk of Asset Seizure Over Sh44bn Bond Default

Kenya risks assets seizure and costly financial penalties if it fails to honour the repayment obligations on the Sh44.79 billion Talanta Stadium bond, whose success now hinges on the extension of the Sports Fund beyond its current 2028 deadline.

The 15-year bond, issued to finance the construction of the 60,000-seater Talanta Sports City on Ngong Road, has raised alarm among lawmakers and financial analysts due to legal and structural vulnerabilities.

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Bondholders have been given the right to seize assets linked to the Sports Fund if the fund is wound up prematurely, a situation that would trigger an immediate recall of outstanding dues.

“The failure to achieve an extension of the fund before its tenor lapses has been identified as an event of default,” reads the offering memorandum issued to investors as per Bussiness Daily.

“A commencement of the winding up of the fund will trigger an acceleration of the notes so that all outstanding amounts are immediately due and payable from the fund. This risk is further mitigated by the notes being a priority charge on the assets of the fund.”

The Sports Fund, which raised Sh10.6 billion in the year to June 2023 mainly from taxes on the betting industry, is expected to pay Sh102 billion in total bond obligations by 2040. However, its current mandate lapses in August 2028, casting doubt over its ability to service the bond through its full term.

By June 2028, the fund will have paid Sh19 billion—leaving a massive Sh83 billion balance, including interest. Should the fund be shut down at that point, the National Treasury would be forced to absorb a bullet repayment of at least Sh47 billion.

“As per the Public Finance Management Act, if the fund is dismissed, the obligations shall be absorbed by the Treasury. It is on that ground that we did not seek any further guarantees,” a source at Linzi FinCo, the bond's structuring agent and part of Liason Group, explained.

Despite its risk exposure, the bond was fully subscribed at Sh44.875 billion against a target of Sh44.791 billion, reflecting a 100.2 percent subscription rate. Investors were lured by a high 15.04 percent tax-exempt return—significantly above prevailing government paper yields of 12.35 percent.

Senators have raised red flags over potential international arbitration and foreign asset seizures if Kenya defaults on the bond—citing Pakistan’s $6 billion Reko Diq debacle as a cautionary tale.

“The committee observed that Pakistan’s foreign assets were on the verge of being seized by international companies after the government defaulted on international arbitration rulings,” said a Senate Finance and Budget Committee report co-chaired by senators Tabitha Mutinda and Eddy Oketch.

“This exposure could present similar risks following the Talanta Hela Fund bond. The committee cautions that should the government fail to honour its part of the bargain in the upcoming bond, it risks similar asset seizures and international arbitration.”

Talanta Hela Council, a newly formed body, will oversee the Sh44 billion Green Bond proceeds aimed at developing creative and sports talent academies in all 47 counties. However, the lack of a formal legal framework to govern the Council’s operations raises accountability concerns.

“The committee recommends that the National Treasury develops a legislative proposal for formalisation of the operations of the Talanta Hela Council, including development of modalities for floating a bond to ensure accountability and ring-fencing of the funds,” the Senate report stated.

The Treasury has been given two months to submit a bill in the Senate to formalise the Council’s operations.

Meanwhile, the FIFA-standard Talanta Stadium is already under construction by China Road and Bridge Corporation and is expected to host the 2027 Africa Cup of Nations’ opening and closing events.