Absa Capital and empowerment partner Vunani Capital today announced the issuance of R2.5bn worth of Transnet bonds.
It was the first capital raising exercise of the parastatal’s planned R30bn domestic medium term note programme that was set up in September this year by Absa Capital and Vunani Capital as co-lead arrangers.
And for the first time in Transnet’s history, the issuance is not backed by a government guarantee thanks to the company’s strong balance sheet which has over R70bn worth of assets.
The bond issue is the first time since 2004 that Transnet has raised funds and the capital raised forms part of the Transnet total capital raising programme of R78bn over the next five years.
Transnet issued R1,250bn of 10 year bonds with a coupon of 9.25% and R1,250bn of 20 years bonds with a coupon of 8.90%. The bonds all carry the Aa2.za National Scale rating from US ratings agency Moody’s.
The issue was oversubscribed and priced off benchmark government bonds.
Stephen van Coller, head of primary markets at Absa Capital, said that there was very strong support for the paper from local institutions.
“This is the start of a major trend to raise funds for South Africa’s huge capital expenditure programmes. We have seen Eskom and Acsa come to market recently and now Transnet has issued the first tranch of its capital raising exercise too.
“We expect to see further corporate bond issuance this year as more companies rush to get capital raised before the year end.”
Van Coller notes that corporate bond issuance is filling the gap left by sharply lower government bond issuance.
“Government paper has been in short supply the last few years because of the budget surplus. High quality corporate paper is expected to filling that gap and we expect the strong demand to continue.”
Van Coller said that the Absa Capital and Vunani Capital consortium was chosen by Transnet to issue the bonds because it proposed a very comprehensive, long-term solution to Transnet’s financing needs that included both onshore and offshore funding alternatives.
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About Absa Capital
Absa Capital, a division of Absa Bank Limited (Absa) and affiliated to Barclays Capital, is a leading South African investment bank with global reach, offering clients financing, risk management and advisory solutions in a wide range of currencies and structures across the globe.