South Africa issued a 10-year foreign bond worth US$1.5bn on May 19. It was priced at +375 basis points over US Treasuries.
The deal was lead-managed by Absa Capital, its parent Barclays Capital, Standard Bank and JPMorgan. Lead-managers say the deal was oversubscribed, and priced tighter than initial price expectations of +385 basis points over Treasuries.
Mark Hussey, head of debt capital markets at JP Morgan in South Africa, says: “The South African government had indicated in the budget that it was looking to raise US$1bn. We, together with Barclays and Standard Bank, were able to build a very substantial order book, totalling US$7bn, so the deal was increased from US$1bn to US$1.5bn.”
The head of syndicate at one of the lead-manager banks told emeafinance on May 20: “The South African bond has done very well with a book composed of high quality accounts. It was seven times subscribed. The bond traded up over two points in the initial aftermarket when the bond was made free to trade on Wednesday morning.”
Investor demand was helped by the fact South Africa is not a very frequent Eurobond issuer. “South Africa is issuing in the international capital market for the first time in two years,” says Kristin Lindow, Moody’s senior vice-president in the sovereign risk group. “Its modest external financing requirements mean that the government only taps the market infrequently.”
The success of the deal is a “strong vote of confidence” in the new government, led by president Jacob Zuma, according to JPMorgan’s Hussey. The government has to finance a budget deficit totalling 3.8% of GDP this year, as it increases spending on infrastructure, partly in preparation for its hosting of the 2010 FIFA World Cup.
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