Good news for Growthpoint

Johannesburg - Growthpoint could become the first South African listed property group to issue commercial short-term bonds to investors in the money market.

This is possible because rating agency Moody's has assigned the company a long-term international grade of Baa2 and a short-term international grade of P2. Growthpoint bonds are therefore investment grade and a relatively safe investment.

At the same time Moody's awarded the property giant a national A1.za long-term grade and P1.za in the short term - the best a domestic company can receive. The rating agency indicated that these grades reflect Growthpoint's strong market position as the largest listed loan stock company in South Africa.

Growthpoint financial director Stuart Snowball says the company is thrilled with the gradings, which will help promote its global competitiveness. It puts the company in the ideal position of entering the debt and bond markets to access finance.

Against this background Growthpoint is establishing a programme to issue short-term commercial bonds worth R500m, 5% of the company's total debt.

In the past the company obtained finance from more traditional sources, including additional mortgages from banks and through commercial mortgage-backed securities.

Growthpoint executive director Estienne de Klerk says the reason for the decision is because short-term bond financing comes at a lower interest rate than long-term financing.

"Ordinary bank margins on debt are about 200 basis points, but issuing bonds enables a margin of between 50 and 70 basis points to be obtained."

- Sake24.com

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