City of Tshwane raises R750m to finance capex

6th June 2013

By: Creamer Media Reporter

  

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The City of Tshwane has raised R750-million through a private placement bond issue to finance its capital expenditure (capex) programme.

“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 investors. The bond issue is a testament to the City of Tshwane’s positive credit and policy track record,” city manager Jason Ngobeni said in a statement.
 
Standard Bank was the sole lead arranger and book runner for the 15-year bond, while the Development Bank of Southern Africa (DBSA) subscribed for the bond.

The R750-million subscription equated to 35% of the total amount of the City of Tshwane’s R2.14-billion 2012/13 borrowing requirements in support of its capital budget.

The remaining 65%, or R1.39-billion, was raised from long-term institutional investors through two other recently issued bonds under the city’s domestic medium term note programme listed on the JSE.

DBSA group executive for the South African Financing division TP Nchocho said the facility formed part of the DBSA’s continuous and accelerated efforts to assist municipalities deal with their infrastructure backlogs.

“We are delighted to be part of this capital expansion programme, which signifies the bank’s commitment to contribute to the development of social and economic infrastructure in the City of Tshwane, which is much needed to improve the quality of life of its 2.9-million residents,” he added.

He noted that the need for infrastructure funding in South Africa was huge, adding that government and utilities planned to invest R1.9-trillion to deal with the infrastructure requirements of South Africa, both in the social and enabling and economic infrastructure over the next five years.

“This is still not sufficient to cover the total needs, which are estimated at R3.3-trillion. Many of these planned investments depend on the mobilisation of funds through various debt and equity instruments, to close the funding gap estimated at R1.4-trillion to address the infrastructure deficit in the country,” the DBSA stated.

Meanwhile, Samson Xulu of Standard Bank’s debt capital markets division said the success of the latest bond issue demonstrated the continued appetite of issuers to diversify their sources of capital in a market that has matured significantly.

He added that the bond issue followed a growing trend by South Africa’s municipalities to tap into debt capital markets as they seek to diversify their sources of funding that are attractively priced.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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