SA clinches record bond deal

Johannesburg - South Africa has successfully raised $2bn in dollar-denominated bonds, Treasury Director General Lesetja Kganyago said on Tuesday night.

The amount is the largest ever raised by South Africa and completes funding for the 2010/11 fiscal year, he said.

The bond is a 10 year one, maturing 9 March 2020. The coupon is 5.5% - the lowest coupon South Africa has ever negotiated in the US dollar market.

This translates into a yield of 197 basis points above the US benchmark of 352 basis points. The interest rate South Africa will pay is 5.59% per annum.

The bond as been distributed 59% into the US, 33% to Europe, 4% to Asia and 0.7% to Latin America.

The bond was lead managed by Deutsche Bank and Standard Bank and co-led by Nedbank.

Kganyago said that what was significant was that of the three banks involved in the deal, only one was foreign. Quartile Capital was the empowerment partner in the deal.

He added that the deal was concluded without conducting a road show.

"All it took was a 45 minute conference call yesterday with investors and we closed the deal with strong demand," he said. "Speed was of the essence and we spotted a market opportunity. We will probably still do a road show to talk to investors though," he said.

"We have a good story to tell and it was well understood by investors. South Africa has just delivered its budget and investors decided to vote with their dollars," he said.

He added that he did not know of many countries in the current environment that could put together a deal such as this in just 24 hours.

He said it was a huge vote of confidence not only in South Africa's growth prospects, but also in its fiscal position.

The bonds are rated A3 by Moody's, BBB+ by Standard & Poor's and BBB+ by Fitch.

- I-Net Bridge