STEADY ISSUANCE
FROM SOES
The Development Bank of South
Africa (DBSA) issued R75m of
seven-month senior unsecured CP
at a credit spread of 74bp over the
three month-interbank rate, and
a cumulative R1.4bn of 12-month
paper at an average spread
of 94.5bp.
DBSA has a national scale rating of
AA+ from Fitch. However, DBSA’s
standalone credit profile does not
warrant such a high rating for many
reasons: the bank only returned to
profitability in 2014, after two years
of losses; the government had to
pledge further capital commitments
of R7.9bn in 2013 to stabilise it; it
is ambitiously targeting 20% book
growth (including outside SADC),
which raises the spectre of future
impairments; it has a concentrated
credit portfolio as it is overweight
government entities (municipalities
and state-owned entities) and it’s
overweight energy projects.
The high rating reflects strong
implied government support
owing to its 100% ownership
and the bank’s importance
in fulfilling the government’s
development mandate.
In addition, Transnet returned
to the market, raising a total of
R1.5bn. On the short end, the
SOE raised R115m in six-month
senior unsecured CP and R385m in
52
ISSUE 4 – JULY 2015
12-month paper, with both being
zero coupon instruments. Transnet
also raised R1bn by tapping its longdated 2025, 2030 and 2040 bonds.
WESBANK AUTO
LOANS
Nitro Securitisation 5 raised R2.4bn
across several notes classed A
to G. The transaction securitises a
pool of amortising motor vehicle
loans originated by Wesbank, a
division of FirstRand. This is the fifth
securitisation of Wesbank loans.
It is interesting to note that only the
Class A, Class B and Class C notes
are rated investment grade, which
means that many funds will be
precluded from investing in the D, E,
F and G notes – despite the fact that
the risk of default is deemed low.
EKURHULENI
ADDS MUNICIPAL
FLAVOUR
The Ekurhuleni Metropolitan
Municipality brought some life
to a sluggish municipal sector,
issuing R750m in senior unsecured
fixed rate bonds. The bonds
are amortising, with R37.5m
repayable biannually until the
final instalment in June 2025; this
structure is a divergence from
the bullet maturity profile that
has previously been used by the
municipalities. Debt instruments
with bullet profiles required
municipalities to continually put
money into a sinking fund in
order to reduce the refinancing
risk, which was an inefficient use
of cash. The amortising profile of
Ekurhuleni’s latest bonds is a neater
way for the metro to address its
refinancing risk.
The funds will be used for the
city’s infrastructure requirements.
Borrowing requirements over the
next three years are expected to
increase as the metro attempts to
provide adequate housing, roads,
electricity, water and sanitation to
a growing population. Maintenance
is another important component of
municipal expenditure.
Other metropolitan municipalities
with outstanding listed bonds
are the City of Cape Town, City of
Johannesburg and City of Tshwane.
Over the past few years Ekurhuleni
has been the most consistent of all
the metros with its term issuance,
having raised debt every year since
2010. It has raised a cumulative
R4.6bn to date.
Ekurhuleni is rated A1 on Moody’s
national scale. This is after Moody’s
downgraded the rating from Aa3
in November 2014, on the back
of a sovereign rating downgrade.
The outlook on Ekurhuleni’s credit
rating is stable, but an uncertain
macroeconomic outlook, together
with the anticipated i