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FINANCE: Cape Town Issues Third Bond

 



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On Monday 08 March 2010, the City of Cape Town issued a further R2 billion bond in terms of its multi-year R7 billion Domestic Medium Term Note (DMTN) Programme. This bond will finance budgeted capital expenditure such as roads, water, sewage, electricity and other infrastructural projects.

The issuing of the bond was nearly 60% over-subscribed. This overwhelmingly positive response from the financial market indicates confidence in the City’s financial governance. In addition, it was particularly encouraging to see the emerging interest from offshore investors for the issue of the bond.

The 15-year ZAR denominated bond, the CCT03, was issued for a fixed rate of 11.16%, which translated to a spread of 208 basis points (i.e. 2.08%) above the corresponding R186 Government Bond on the day. This is firmly within the range of the price guidance provided prior to the issuing of the bond. A broad range of 14 investors took up the bond, which will be listed on the Johannesburg Stock Exchange (JSE).

Budget allocations will be made annually for the funds raised through the bond issue to be repaid at the end of the loan period by means of a sinking fund created for this purpose, in line with other bonds issued by the City.

Executive Deputy Mayor and Mayoral Committee Member for Finance, Alderman Ian Neilson, says that the City was greatly assisted in the bond process by the recent Credit Rating which was performed during February 2010 by Moody’s Investors Service. “Moody’s confirmed the City’s rating of Aa2.za with a stable outlook, providing investors with the confidence to support the City’s borrowing strategy,” he said.


 
 
 
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