June 23, 2004
By Thomas Thale
THE City of Johannesburg is issuing a R1-billion, 12-year bond to refinance its debts and fund capital expenditure.
The bond will be issued just before the executive mayor, Amos Masondo, delivers his budget speech on Wednesday 23 June.
Bidding for the bond will open at 9am and close at 12am. Britain's Barclays Bank, the lead managers of the bond, will table its recommendations before a special council meeting later in the day.
The council has to approve the final price and structure of the bond, says Jason Ngobeni, the City treasurer.
This will be the second bond issued by the City this year. In April, the City successfully issued a R1-billion unsecured bond.
Ngobeni says the new bond carries a 40 percent partial guarantee from the International Finance Corporation and the Development Bank of South Africa.
"This is the first partially guaranteed bond on the market," says Ngobeni.
Fitch Ratings, an international ratings agency, recently assigned a rating of AA- to the bond, a little higher than the city's rating of A-.
Quinton Zunga, a bond adviser from Barclays, says the bond will be priced on the R157 government bond plus a credit spread.
"It will be redeemed over the last three years in semi-annual installments," he says.
Zunga says that, although the auction will be held on 23 June, the bond will only be settled on 29 June.
He is confident the market will respond positively to the bond.
"It has already generated much appetite on the market," says Zunga.
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