Transnet issues first African local-currency bond on the London Stock Exchange
On 25 November 2013, Transnet announced the successful issuance of its international R5Bn bond registered with the London Stock Exchange. The 7.5 year international bond issued at a yield of 9.5%, is the first ever African local-currency issuance on international capital markets.
This issuance comes after Transnet’s successful road shows in the UK and North America. The company said that the bond was part of a strategy to diversify funding sources and lower Transnet’s average cost of debt.
Transnet CEO, Brian Molefe, went on to add that, “For the country, the issuance confirms South Africa as one of the leading investment destinations among emerging markets and provides a much needed boost for investment inflows. It signals increasing investor confidence in South Africa’s economy".
"Moreover, the issuance confirmed Transnet's improved credit standing and investor confidence in its ability to execute programmes under its market demand strategy,"
According to Molefe, the firm received demand of slightly over 5 billion rand for the paper, reaching the $500 million amount considered to be a benchmark issue. The bond was however about 197 basis points over South African R208 government bonds that mature in the same year.
This bond is Transnet’s third successful issuance under its global medium-term note programme (GMTN). "Crucially, all Transnet’s bonds under the medium-term note programme are issued on the strength of Transnet’s balance sheet with no government guarantees," added Mr. Molefe.
Transnet will use the proceeds for part of its 307.5 billion rand plan to improve South Africa's rail and ports infrastructure. Through the issuance, Transnet has also met its R15.6bn funding requirement for the current financial year.
In 2012, Transnet placed a $1 billion 10-year Eurobond in the United States as part of capital raising. The company plans to return to international capital markets in 12-18 months.