Sanral chooses the long road before returning to bond auction market

Michelle Meiklejohn via freedigitalphotos

There was more demand for index-linked debt from investors, but the agency preferred bonds with a longer tenure, chief financial officer Inge Mulder said. She said a pricing schedule had to be submitted to the JSE and the agency was still busy with the process.

"As a best-practice principle you always try to match liabilities and assets. Sanral's assets are long (roads), hence our policy states that we endeavour to have an average weighted maturity of longer than 10 years. Our current average maturity is just below 10 years" said Mulder.

The agency cancelled all bond auctions in May, saying it was waiting for certainty to be provided by a task team led by Deputy President Cyril Ramaphosa on the funding of roads with e-tolls. This came after Sanral's April bond auction, which attracted only one bidder, raised only R270m of the R600m a month it needed.

Losing bidders

Sanral first began losing bidders in June last year after the Gauteng provincial government established a panel to review the socioeconomic effects of e-tolls. Two days after the announcement of the panel, two of the 11 bidders remained, with another joining later. The panel proposed a hybrid system to pay for the Gauteng Freeway Improvement Project, which included e-tolls.

Ramaphosa's task team followed after the panel to look at funding options, though the user-pays principle had been emphasised by Finance Minister Nhlanhla Nene and Gauteng Premier David Makhura.

In May, Ramaphosa announced a new dispensation for e-tolls, which included vehicle licences being withheld if e-toll payments were not made within 12 months, and a reduction of fees to R255 a month, 30 free trips and penalties capped at R450. Sanral went on its investor roadshow in June.

A dire need for cash

"As we are not currently in dire need for cash, we decided to wait until this bond is registered and approved by the JSE," Mulder said. Sanral will seek to raise R300m a month with each auction instead of the R600m required before. The Treasury and Gauteng will fund the shortfall.

RMB credit analyst Elena Ilkova said Sanral and other state-owned firms preferred long-tenure bonds because their expenditure programmes and the assets they build tend to be long-term.

Source: Business Day