8 November 2013
South African state company Transnet issued a R5-billion bond registered with the London Stock Exchange on Thursday, becoming the first African company to list a local currency-denominated bond on the international capital markets.
Transnet will use the proceeds of the bond to fund part of its seven-year, R307-billion infrastructure investment programme to expand South Africa’s rail, port and pipeline infrastructure.
The placement of the bond, following successful roadshows by Transnet in the UK and US, “confirms South Africa as one of the leading investment destinations among emerging markets and provides a much needed boost for investment inflows,” Transnet said in a statement on Thursday.
At the same time, the landmark issuance “confirms Transnet’s improved credit standing and investor confidence in the company’s ability to execute programmes under our audacious market demand strategy”.
Ratings agency Fitch Ratings last week upgraded Transnet’s credit rating from “BB+” to “BBB”. Transnet said this affirmed its ability to raise funds in the market “on the strength of its balance sheet without government guarantees, allowing the fiscus to channel its resources towards the country’s other pressing needs”.
Transnet’s latest bond was issued at a yield of 9.5 percent and will mature in 2021. It is the third successful bond issuance Transnet has made to meet its infrastructure investment funding requirement, and means that the company has now met its R15.6-billion funding requirement for the current financial year.
All three bonds were issued on the strength of Transnet’s balance sheet, with no government guarantees required.