Transnet has successfully issued $1bn of five-year bonds in its first international debt sale in more than a decade.
The state-owned rail and port operator issued the debt instruments, which pay a coupon of 8.25%, on January 30 in a sale that was 2.9 times oversubscribed, according to a statement to the JSE’s stock exchange news service on Friday. The bonds, which are listed on the International Securities Market of the London Stock Exchange, form part of Transnet’s $6bn global medium-term note programme (GMTNP).
“This demonstrates the investor confidence in the company, their appreciation of its role in the economy as well as expectations that implemented strategies will improve operational performance and consequently ensure positive financial outcomes,” Transnet said in its statement.
Absa, JP Morgan, Standard Bank SA and their respective partners Tysis Advisory, Capital Link Partners and Afris Capital acted as Transnet’s lead arrangers for the bond issue. The proceeds of the debt sale will go towards repaying existing debt, financing capital investments and ongoing operational expenditure.
S&P Global Ratings confirmed Transnet’s credit rating of BB-, which is three notches below investment grade. The ratings agencies has a negative outlook on Transnet's BB- rating.
Transnet has faced a raft of criticism from SA fund managers and the mining industry in recent months due to ongoing operational woes that have negatively affected SA's mineral exports.
Two months ago, the Minerals Council SA called for the sacking of CEO Portia Derby over the company's dysfunctional port and rail networks that have been blamed for causing coal exports from the Richards Bay Coal Terminal to fall to the lowest since 1993.
Transnet is also currently in breach of debt covenants with some lenders due to its cash interest cover (CIC) ratio failing to meet the agreed minimum level of 2.5 times. When the firm released its half-year results in December 2022, its rolling CIC ratio was 2.1 times due to a drop in revenue caused by the effects of the KwaZulu-Natal floods, fuel and cable theft as well as vandalism of its infrastructure.
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