Transnet plans to issue a dollar-denominated bond to fund debt repayment obligations as well as general capital and operational investments.
The state-owned port and rail operator confirmed to Business Day that it was holding a series of investor meetings on Thursday to sell a five-year dollar bond under a new $6bn Global Medium Term Note Programme (GMTN). Bloomberg News had earlier reported the planned foreign currency bond issuance, citing people familiar with the matter.
Transnet, which is rated Ba3 by Moody’s and BB- by Standard & Poor’s has mandated Absa, JPMorgan and Standard Bank as joint bookrunners. The company held a call with global and other investors on Thursday and its decision on when to issue the debt note will be subject to market conditions.
Business Day reported in December that Transnet was facing two bond repayments due in February worth a combined R1.088bn. The total amount relates to R556m in bonds maturing on February 7 2023 and another R532m of debt instruments that are due to be repaid on February 13.
“We can confirm that the GMTN is under way, as part of the company’s funding programme; this is a new series,” Transnet told Business Day in a statement. “The proceeds will go towards funding redemptions, as well as capital and operational investments.”
The planned issuance comes as SA’s coal exports plunged to a record low. Shipments via the Richards Bay Coal Terminal (RBCT) fell to about 50-million tonnes in 2022, the lowest since 1993, when it shipped 51-million tonnes, RBCT CEO Alan Waller said the company’s annual results presentation on Thursday.
The drop was directly attributed to the low availability of locomotives and cable theft that has disrupted Transnet Freight Rail (TFR) volumes to the terminal. The decline also coincided with a roughly 400% increase in coal export prices over the last two years.
Transnet has been under mounting pressure in recent months from market critics as well as the mining industry over the impact of its creaking infrastructure on mineral exports. Earlier this month Minerals Council SA called for the axing of two senior Transnet leaders, including CEO Portia Derby, citing what it called the “catastrophic impact” that the company's alleged dysfunction was having on the mining industry.
In a confidential letter dated December 4 2022, the Minerals Council — which speaks on behalf of the country’s biggest mining companies — said the worsening operational performance at Transnet demanded urgent action.
The letter also called for the removal of Sizakele Mzimela, who heads Transnet’s freight rail division and said Minerals Council “members had lost confidence in the company's leadership.
With Denene Erasmus and Katharine Child.
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