Transnet raises R2.15bn despite Moody’s downgrade
LOGISTICS utility Transnet has better hope of meeting its infrastructure and financial commitments after it successfully raised more than R2 billion in an investor roadshow, despite a Moody’s downgrade in November that should have dampened investor confidence.
Transnet announced it had raised R2.15bn on senior unsecured notes ranging from a tenor of one to 12 years, translating to an over-subscription of the issuance by 1.28 percent, the utility said in a regulatory JSE announcement yesterday.
“The over-subscription demonstrates the support and confidence of investors in Transnet and its strategic direction,” Transnet told investors and stakeholders.
Pundits said Transnet had been placed in good stead by the remedial plan put forward by its current executive team, in which it aims to address its Public Finance Management Act compliance shortcomings.
Moody’s noted in November that the company maintained a good relationship with its lenders and had been given some concessions on urgent covenants because of the commitment of the current executive team in addressing legacy issues, largely stemming from the state capture period in which the utility reportedly paid out more than R41bn in wrongful transactions.
Moody’s expressed faith that the company would secure financing commitments allowing it to meet its obligations due until September 2022, though the risk of default could not be ruled out owing to some maturities drawing closer, without secured financing.
According to Transnet’s Applicable Pricing Supplement, dating back to October 2011 in relation to the R80bn Domestic Medium Term Note and Commercial Paper Programme, the utility has not exceeded the mandate of that note.
“As at the date of this Applicable Pricing Supplement, the issuer confirms that the authorised programme amount of R80bn has not been exceeded.“
The issuer has issued R60.6bn and estimates it will issue R4.3bn commercial paper, excluding this issue, and each other issuance of notes, issuing on the same issue date, during the current financial year, ending on March 31, 2022, it said. Transnet’s current liquidity issues stem from irregular expenditure, which predates the current board and executives, and remained unaccounted for in financial periods prior.
In September, 2021, Transnet reported a record net loss of R8.4bn for its financial year to the end of March 2021, attributed mainly to the impact of Covid-19 on its port and rail operations. It further breached its loan covenants with an outstanding balance of R19.1bn as at September 30.