SA invests US$5 billion in international capital markets

Tuesday, September 24, 2019

The South African government has successfully placed two US$5 billion tranches in bonds that will mature in 2029 and 2049, respectively.

The bonds were placed in the international capital markets on 23 September 2019.

In a statement, National Treasury said US$2 billion will mature in a decade, while US$3 billion will mature in 30 years.

“Due to favourable pricing and a sizeable order book, the Republic was able to prefund an additional US$1 billion over the planned US$4 billion. Prefunding is the early issuance of an amount planned to be issued in future years. This is done to take advantage of good pricing and favourable market conditions, while reducing future borrowing need,” said Treasury.

The 10-year bond is priced at a coupon rate and re-offer yield of 4.85%, which represents a spread of 313 basis points above the 10-year US Treasury benchmark bond.

“The 30-year bond, priced at a coupon rate and re-offer yield of 5.75%, which represents a spread of 358.6 basis points above the 30-year US Treasury benchmark bond,” National Treasury said.

The transaction was 2.71 oversubscribed, with investor demand across Europe, North America, Asia, South America, Middle East, Africa and others. In terms of investor type, demand was supported by a mixture of fund managers, insurance and pension funds, financial institutions, hedge funds and others.

Treasury said government sees the success of the transaction -- believed to be the largest ever out of sub-Saharan Africa -- as an expression of investor confidence in the country’s sound macro-economic policy framework and prudent fiscal management.

Treasury has mandated Citi, Deutsche Bank/Nedbank (consortium), Rand Merchant Bank, and Standard Bank as Joint Bookrunners. The empowerment partners for the respective banks are Crede Capital Partners, Rho Capital, Theza Capital and Africa Rising Capital.

The 2019 Budget Review made provision for US$2 billion equivalent to be raised in the international capital markets in 2019/20 to fund government’s foreign currency commitments. Of the US$4 billion planned for 2018/19, only US$2 billion was issued and the remaining US$2 billion was deferred to 2019/20, bringing the total foreign borrowing requirement for the year to US$4 billion. –