The listing of the Linzi 003 Infrastructure Asset-Backed Security (ABS) at the Nairobi Securities Exchange (NSE) on 23rd July, 2025, raising over KSh44 billion, marks a transformative moment for Kenya’s capital markets. For the first time, an infrastructure-backed securitization transaction of this scale has been successfully launched and listed, demonstrating the untapped potential of alternative financing instruments in catalyzing infrastructure development in emerging economies like Kenya.
As legal practitioners at the intersection of financial innovation and regulatory compliance, we believe the Linzi 003 transaction offers valuable lessons - and presents immense opportunities - for legal structuring, risk mitigation, and regulatory advisory. This article unpacks the Linzi ABS in plain language, examines the relevant legal framework, and highlights the role of legal experts in shaping similar transactions going forward.
WHAT IS AN INFRASTRUCTURE ASSET-BACKED SECURITY (ABS)?
An Asset-Backed Security (ABS) is a financial instrument created by pooling various revenue-generating assets - such as loans, leases, or receivables - and then selling claims (or securities) backed by those assets to investors.
In the case of an Infrastructure ABS, the underlying assets typically consist of future receivables from infrastructure projects - such as toll collections, utility payments, or lease fees tied to public-private partnership (PPP) infrastructure developments. The Linzi 003 ABS is backed by cash flows expected from infrastructure usage and is issued through a Special Purpose Vehicle (SPV) set up solely to isolate and manage those receivables.
This kind of transaction enables governments, municipalities, or developers to unlock immediate capital against predictable long-term income streams, thereby de-risking infrastructure finance and attracting institutional investors into the infrastructure space.
WHY THE LINZI 003 LISTING MATTERS
It Diversifies Kenya’s Capital Markets: The listing introduces a new asset class-structured securities - that can diversify the range of investment products on offer to pension funds, insurance companies, and sophisticated investors.
It Demonstrates Legal and Regulatory Maturity: Successfully issuing and listing a structured product of this complexity signals Kenya’s readiness for more sophisticated financial instruments - and by extension, deeper investor confidence.
It Opens the Door for Replication and Innovation: Other counties, parastatals, and developers may now consider similar ABS structures to finance roads, bridges, energy, water, or housing projects - provided the legal underpinnings are solid.
Any Infrastructure ABS - like the Linzi 003 - rests on a lattice of interrelated laws and regulations. A well-structured ABS must be legally sound at every stage: from structuring the SPV to listing the security. The key legal instruments include:
1. The Capital Markets Act (Cap 485A)
This Act, administered by the Capital Markets Authority (CMA), provides the overarching legal framework for the issuance and regulation of securities in Kenya. Under this law, the CMA vets ABS issuance documents and ensures investor protections are embedded in the structure.
2. Capital Markets (Securities) (Public Offers, Listing and Disclosures) Regulations, 2002
These regulations guide the offering and listing of securities, including structured products like ABS. They stipulate detailed disclosure requirements, issuance processes, and the responsibilities of transaction advisors and legal counsel.
3. Capital Markets (Licensing Requirements) (General) Regulations, 2002
This regulation governs the licensing of fund managers, investment advisors, and other professionals involved in securitization. It is relevant where a transaction involves complex fund structuring or public investment solicitation.
4. Capital Markets (Collective Investment Schemes) Regulations, 2001
If the ABS involves pooled investments or fund management strategies, compliance with these regulations becomes crucial.
5. Trustee Act and CMA Trustee Regulations
Where ABS transactions involve the creation of trusts or appointment of trustees (as is common in SPV structures), these laws govern the duties, powers, and fiduciary obligations of trustees in relation to the ABS.
6. Companies Act, 2015
This governs the incorporation and operation of the SPV - a separate legal entity used to isolate the infrastructure cash flows from the originator’s balance sheet.
THE ROLE OF LAW FIRMS IN ABS TRANSACTIONS
The Linzi ABS transaction underscores the pivotal role law firms can play in structuring, legal risk assessment, regulatory compliance, and transaction support. Here’s how:
1. Transaction Structuring & Legal Engineering
Lawyers are essential in advising on the ideal SPV structure, crafting transaction documents (including offer memoranda and securitization agreements), and ensuring compliance with all applicable legal frameworks.
2. Regulatory Interface & Compliance Advisory
Engagement with regulators like the CMA and NSE requires technical knowledge and strategic positioning. Legal counsel must prepare regulatory submissions, facilitate approvals, and offer interpretations on grey areas in law.
3. Due Diligence and Legal Opinions
ABS issuance demands high levels of investor assurance. Legal teams conduct due diligence on the originator, the receivables, the SPV, and associated third parties, and deliver formal legal opinions on enforceability, asset ownership, and risk isolation.
4. Investor and Trustee Support
Investor subscription agreements, trustee deeds, risk disclosure statements, and investor protections must be carefully drafted and legally validated.
5. Post-Issuance Monitoring and Compliance
Even after listing, ABS transactions require ongoing legal advisory on compliance, disclosure obligations, investor reporting, and management of potential disputes.
KEY OPPORTUNITIES FOR LEGAL PROFESSIONALS IN ABS GROWTH
As ABS transactions gain traction, legal practitioners who position themselves early will have significant opportunities to lead:
Municipal and County Infrastructure Bonds: Counties seeking alternative financing could emulate the Linzi ABS model, requiring legal advisors to structure county-level SPVs and securitize county infrastructure revenue streams.
Affordable Housing Securitizations: Future rent receivables from large-scale affordable housing programs can be securitized with robust legal structures.
Green ABS and Climate-Linked Bonds: Law firms can help structure environmentally focused ABS, tapping into green finance and Environmental, Social and Governance (ESG)-driven investor appetite.
Cross-Border Securitizations: Legal teams with regional and international competence can structure and advise on ABS instruments backed by multi-jurisdictional infrastructure assets or donor-backed receivables.
The Linzi 003 ABS transaction has set a precedent - and a challenge - for Kenya’s financial and legal professionals. With appropriate structuring, legal innovation, and regulatory compliance, structured finance can become a game-changer for Kenya’s infrastructure development agenda.
At Lex Partners Advocates LLP, we are at the forefront of these innovations. Our consortium of legal and consulting firms (Patrick, Teddy & Partners Advocates, Strategic Legal Solutions Group LLP, and International Consulting House LLP) offers:
- Legal structuring and documentation for securitization and ABS instruments and/or transactions, due diligence and compliance services;
- Regulatory compliance advisory with the CMA, NSE, and related bodies, including drafting enabling guidelines or frameworks;
- Offering ESG and feasibility audits;
- SPV formation and transaction support for both public and private infrastructure developers; and
- Policy and legal reform input to support the broader securitization and structured finance ecosystem in Kenya.
If you are a developer, fund manager, county government, or public-private project promoter seeking innovative capital raising options, we are ready to walk with you. Reach out today for a confidential consultation or partnership dialogue.
💼 Lex Partners Advocates LLP
📩 Email: info@lexpartners.co.ke
📞 Phone: +254 715 310 677
🌐 Website: www.lexpartners.co.ke
Let’s unlock infrastructure finance with the law as a strategic enabler.
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