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Second Sanral bond auction cancelled

12 May 2016

The South African National Roads Agency Limited (Sanral) has cancelled a second bond auction this year, to wait for an "improvement in market conditions" and the conclusion of the review by rating's agency Moody's. Sanral is also waiting for the final numbers of its offer of a 60% discount on historic e-toll debt before going to market.

JMK via Wikimedia Commons

Last month, Sanral cancelled its bond auction, the third one for the year, after it failed to attract enough investor interest. The agency's February and March bond auction attracted significant investor interest. Sanral needs to raise R400m from its monthly bond auctions this year.

The Treasury and the Gauteng provincial government will cover a R390m annual revenue shortfall in the next 22 years, resulting from additional discounts and changes under a new dispensation for e-tolls announced by Deputy President Cyril Ramaphosa last year.

"We still have sufficient cash flow and would rather wait for the uncertainties such as the Moody's review to be concluded, as well the final numbers of the extended Less60 campaign to be available," Sanral spokesman Vusi Mona said yesterday.

Last year, Sanral cancelled its bond auctions for five months following a number of failed auctions and after its April bond auction attracted only one bidder. The agency wanted to wait for certainty about the future of e-tolling before returning to the bond market to raise funding.

Investors in Sanral bonds had dropped from 11 bidders in April 2014 to three bidders, two days after the announcement of a Gauteng panel in June 2014, which would review the socioeconomic effect of e-tolls. Last May, Ramaphosa announced a new dispensation for e-tolls including a 60% discount on all historic e-toll debt accumulated between December 2013 and August 2015, as well as a reduction of fees to R255 a month, 30 free trips for infrequent users and penalties capped at R450.

Sanral returned to the bond market in October last year, attracting only three bidders for its auction.

RMB Credit analyst Elena Ilkova said investors and bond issuers were very nervous due to the Moody's review and rating agency Standard and Poor's review in June, among a number of factors. "In general terms issuance of bonds on the market in the first few months of this year have not been high given where we are in the cycle, which is not unusual," Ilkova said.

"Everyone is very nervous. It is not a bad idea to wait out the volatility," she said.

Source: Business Day

Source: I-Net Bridge

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