Sanral aims lower in next bond issue

THE South African National Roads Agency Limited (Sanral) is returning to the bond market next month following an investor roadshow but it will aim to raise only half the R600m a month it required from bond auctions prior to its hiatus.

However, investors need “firm confirmation” that compliance with e-tolls is improving, analysts say.

Sanral cancelled all bond auctions in May, saying it was waiting for the task team led by Deputy President Cyril Ramaphosa to offer certainty on the funding of roads with e-tolls after it attracted only one bidder for its April bond auction.

In May, Mr Ramaphosa announced a new dispensation for e-tolls, which included vehicle licences being withheld if e-toll payments were not made within 12 months, as well as a reduction of fees to R255 a month, 30 free trips and penalties being capped at R450.

Sanral went on its annual investor roadshow in June.

It was “received positively” with many questions on the new dispensation and compliance, Sanral chief financial officer Inge Mulder said yesterday.

It would return to the bond market seeking R300m instead of R600m, to allow it time to provide investors with information regarding e-toll registrations

and cash receipts.

“The new dispensation did not affect this amount as the shortfall is funded by Treasury and the province,” Ms Mulder said.

“However, the auction amount has been reduced as a result of the current cash on hand being sufficient. This is mainly due to the cash raised from issuing CPI-linked bonds earlier in the year,” she said.

Sanral is due to publish its financial results in September.

The agency said it had decided to return to the market in September to allow it time to submit a full quarter of financial information since the announcement of the new dispensation.

“Obviously investors are interested in the trend on our registrations and cash receipts since the announcement, which is why we decided to return to the market only in September,” said Ms Mulder. She said actual cash receipts from motorists had exceeded Sanral projections.

“We are satisfied with the slow but steady increase in payments.

“Most toll routes take between 16 and 22 years to break even and we are confident that this will also be the case on this project.”

RMB credit analyst Elena Ilkova said Sanral had a place in the bond market and could return as it had “its arrangements in place” and had released data showing e-toll payments had improved.

However, investors would want to see “firm confirmation” that compliance rates were improving.

“Whether September is a feasible time for Sanral to return to the bond market depends on what information can come out by then. Once the financial results are okay and in line with expectations, I can see no impediment to it returning to the bond market,” she said.

Sanral has held three bond auctions this year and only one of them was successful. Its auction in February — the first for the year and attended by three bidders — raised only R400m at an acceptable spread, despite receiving R621m in bids. Its March auction raised R600m.

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, only two of the original 11 bidders remained, and this has grown to just three.