Land Bank bond auc­tion eas­ily raises R1 bil­lion

The Sunday Independent - - BUSINESS - Sandile Mchunu

THE LAND and Agri­cul­tural De­vel­op­ment Bank of South Africa (Land Bank) has raised R1 bil­lion in a bond auc­tion with new in­vestors show­ing keen in­ter­est.

The bank said its team had gone into the auc­tion with a tar­get of rais­ing R750 mil­lion last month with an op­tion to up­size the is­sue al­lo­ca­tion to R1bn.

Chief fi­nan­cial of­fi­cer Ben­nie van Rooy said the to­tal value of bids re­ceived rose to R5.1bn, with more than 90 per­cent fall­ing within pric­ing guid­ance.

“The bank man­aged to clear all three notes (one-, three- and five-year tenures) be­low pric­ing guid­ance, ef fec­tively se­cur­ing listed debt fi­nanc­ing at sig­nif­i­cantly cheaper rates than six months ear­lier,” he said.

The bond auc­tion comes after the bank re­ported a 10 per­cent rise in net in­ter­est in­come to R1.3bn in Au­gust for the pe­riod to end March.

This was up from R1.1bn recorded dur­ing the cor­re­spond­ing pe­riod last year. The bank also re­ported a 13 per­cent in­crease in net profit to R347m.

The strong per­for­mance came against sub­dued con­di­tions in the agri­cul­tural in­dus­try, which in­cluded the worst drought in a cen­tury and a con­tract­ing econ­omy marred by volatile ex­change rates af­fect­ing com­mod­ity prices.

How­ever, the agri­cul­tural sec­tor re­ceived a boost last week when sec­ond quar­ter agri­cul­tural gross do­mes­tic prod­uct (GDP) fig­ures showed that it had grown by 33.6 per­cent in the sec­ond quar­ter of the year.

In June, the bank re­ceived a $300m loan fa­cil­ity with a 10-year ma­tu­rity pe­riod.

The fa­cil­ity was backed by the Mul­ti­lat­eral In­vest­ment Guar­an­tee Agency (Miga), the po­lit­i­cal risk in­surance and credit en­hance­ment arm of the World Bank Group.

The Land Bank said at the time that the loan was fa­cil­i­tated by Stan­dard Char­tered, which would also act as a book run­ner, and that the funds would play a huge role in sup­port­ing farm­ers in South Africa.

Van Rooy said this week that the bank had at­tracted five new ma­jor as­set man­ager in­vestors into the book, three of whom re­ceived al­lo­ca­tions on the day.

He said the Land Bank had worked hard to im­prove cor­po­rate gov­er­nance over the last 18 months, put­ting in place the nec­es­sary sys­tems and pro­cesses as well as ca­pac­i­tat­ing its work­force to be able to de­liver con­sis­tently against strin­gent tar­gets.

“Ini­tia­tives have in­cluded the im­ple­men­ta­tion of a re­vised code of con­duct and code of ethics poli­cies, as well as the adop­tion of a po­lit­i­cally ex­posed per­sons’ pol­icy,” Van Rooy said.

The bank has played a piv­otal role in de­vel­op­ing emerg­ing farm­ers with R2bn made avail­able dur­ing the year through its de­vel­op­men­tal sec­tor to sup­port emerg­ing farm­ers.

Van Rooy said they were de­lighted at the in­creased ap­petite for Land Bank credit, which showed a clear recog­ni­tion of the bank’s good work, par­tic­u­larly around main­tain­ing strong lev­els of cor­po­rate gov­er­nance.

“This is es­pe­cially sig­nif­i­cant as the bank does not re­ceive any di­rect fi­nan­cial sub­si­dies from the gov­ern­ment and has to raise money di­rectly from the cap­i­tal mar­kets on an un­guar­an­teed ba­sis to drive its man­date of fa­cil­i­tat­ing eco­nomic trans­for­ma­tion and so­cial in­clu­siv­ity in the agri­cul­tural sec­tor,” he said.

“With greater in­ter­est from the mar­kets, we are con­fi­dent we will be able to make sig­nif­i­cant strides in the achieve­ment of our ob­jec­tives.”

The bank does not re­ceive any sub­si­dies from gov­ern­ment and raises money on cap­i­tal mar­kets

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