Standard Bank Group is the sole lead arranger and book runner for a 15-year bond R750-million bond raised by the City of Tshwane through a private placement bond issue to finance the city’s capital expenditure programme.
The bond is priced at 275 basis points over the R186 resulting in a fixed coupon of 9.46%. The city has seen the debt capital market as a viable source of funding its capital expenditure programme and has issued two bonds totaling R1.39-billion, with maturities of 10 and 15 years in the past two months.
Samson Xulu of Standard Bank Group’s Debt Capital Markets team says the success of this bond issue demonstrates the continued appetite from issuers to diversify their sources of capital in a market that has matured significantly. According to Mr Xulu, the bond issue follows a growing trend by South Africa’s municipalities to tap in to debt capital markets as they seek to diversify their sources of funding that are attractively priced.
Levels of issuance in the South African bond market are expected to surpass last year’s levels of R100 billion, given the strong liquidity in the market. The growing demand for this source of funding is largely being driven by the widening of local investment mandates, which allows investors to participate more broadly in the corporate bond market.
The City Manager, Jason Ngobeni, says: “This is an exciting development in the city’s evolution. The bond issue affords us an opportunity to make the case that municipal bonds are a credible and lucrative asset class for the investors. The bond issue is a testament to the City of Tshwane’s positive credit and policy track record.
“Through this issue investors have demonstrated that demand for debt capital is increasing rapidly.”
Collectively, the City’s bonds provide a sustainable source of funding to fulfill Tshwane’s 2055 vision, which positions the metro as an African Capital City of Excellence.
Read more about the City of Tshwane at www.tshwane.gov.za.
Standard Bank Group’s capabilities in capital debt markets are described at www.standardbank.com/cib.