Johannesburg - While many corporates remain wary of lending from banks, they have no such qualms about approaching debt markets and keeping investment bankers busy.
That is the word from Absa Capital, the investment banking division of JSE-listed banking group Absa.
"While banks remain wary of lending, the debt capital markets are on fire," said Absa Capital principal Anand Naidoo in an interview with Fin24.com.
This, he said, could be a precursor to some improved economic activity both in South Africa and on the African continent.
"As time goes by, the double-dip worry abates," Naidoo said.
Naidoo was backed up by colleague Anthony Wilter, co-head of investment banking at Absa Capital, who said there is an increasing appetite for debt deals in South Africa.
"Companies are looking to use their equity as currency," he said.
He pointed out that South Africa had seen solid flows into both bond and equity markets over the last year as international asset managers sought out yield in emerging markets. These included South Africa, Turkey, Brazil and the Middle East.
In recent months, Absa Capital has completed a number of high-profile debt market transactions which saw it take top spot on the Bloomberg 2010 Underwriter Rankings league table.
Last week it announced the successful raising of R1.2bn for the Land Bank. In September, it completed the first public corporate bond switch auction in the South African market for Barloworld Limited.
This followed a successful raising of R2.5bn for BMW Financial Services, the largest listed bond issue in South African debt capital markets since October 2008.
It has also concluded a number of smaller transactions, including a R128m bond issue for mining firm Simmer & Jack in July.
Two areas Wilter and Naidoo see Absa Capital benefiting from in the next two years are strong spend from parastatals, and the bank's know-how of the rest of the continent.
Naidoo says various parastatals - including Eskom, SAA, the South African National Roads Agency and Transnet - are expected to spend about R846bn in the next few years, much of which will be raised in debt markets.
This is going to have spinoffs for companies associated with the provision of infrastructure and support services.
"The numbers are mind-boggling," said Naidoo.
Further afield, the competition is tough for deals on the continent as Absa Capital butts heads with international peers. However, Wilter believes that Absa Capital and its relationship with international shareholder Barclays has put the bank in a solid position.
He points to recent transactions such as the merger between telecommunication firms Bharti and Zain and a corporate bond issuance for Safaricom in Kenya as proof of its experience.
Stockbrokerage Imara SP Reid has Absa Group rated as a "hold" at a price of R131, with analyst Steve Meintjes commenting that the operating outlook for the group looked "muted".
Meintjes did, however, compliment the group on establishing its presence on the rest of the continent during the past year, particularly in Nigeria, Tanzania and Namibia.
- Fin24