Absa Capital, the investment banking division of Absa Bank Ltd, acting as sole lead arranger, raised an R815m 10 year, fixed-rate bond issue for the Ekurhuleni Metropolitan Municipality (Ekurhuleni). This is Ekurhuleni’s first bond issue.
Ekurhuleni is the third metropolitan municipality in South Africa to issue in the local debt capital market following the City of Johannesburg and the City of Cape Town. Absa Capital also arranged the inaugural issuance on behalf of the City of Johannesburg in 2004 (acting as ACMB) and the City of Cape Town in 2008.
Pricing was within guidance with a total of R1.516bn total bids (1.9x oversubscribed). The bond was priced at 185 basis points over the relevant government benchmark bond (R208) resulting in a fixed coupon of 10.56%.
Ekurhuleni’s credit rating of Aa2.za by Moody’s is among the highest of the five metropolitan municipalities rated by the agency, underpinned by its relatively large economic base, moderate debt levels and traditionally conservative financial management.
Prasanna Nana, Head of the South African Debt Capital Markets team at Absa Capital, said: “The issuance of this bond is an important move for Ekurhuleni towards broader and diversified funding sources for infrastructure projects and capital expenditure.”
Proceeds from the sale of the bond will be utilised for general capital expenditure funding.
Infrastructure assets form 90% of Ekurhuleni’s asset base and include road, electricity, water and sanitation networks. An amount of R2.5bn was spent on capital projects during the 2008/09 financial year and a further R1.8bn during the 2009/10 financial year. A portion of the 2009/10 investment in infrastructure will be funded from this municipal bond.
Zakes Myeza, Chief Financial Officer of Ekurhuleni Metropolitan Municipality said: “The area’s strong infrastructural growth in recent years serves to support economic expansion, while revenue management and enhancement projects by the municipality aim to improve income by an estimated R5bn by 2016.”
EndsAbout Ekurhuleni Metropolitan Municipality
Ekurhuleni is the fourth largest metropolitan municipality in South Africa with a population of almost 3 million people. It was established in 2000 with the amalgamation of nine East Rand towns and two councils. It is one of three metropolitan municipalities in Gauteng and houses a large industrial concentration accounting for 23% of Gauteng’s Gross Geographical Product, with manufacturing accounting for 28% of the area’s total production. 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.
Absa Capital was rated the “Best Primary Markets House” in the 2009 JSE Spire Awards – one of nine first place rankings the firm secured at the awards. Issued by:
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