Transnet deal reaches financial close
A year and a half after being brought to market, financial close has been reached on a R864mn (US$105mn) deal for South Africa’s rail company Transnet.
The fixed rate loan facility was arranged by Barclays, which acted as coordinating mandated lead arranger, and is being fully funded by Nedbank.
GTR has learnt that the funding was done on a tender panel basis. A market source tells GTR that “a number of banks” bid for the deal, and that “the most competitive bank ended up funding it”.
Other sources have confirmed to GTR that the pricing was too low for other banks to follow, and that it is unusual for one bank to be funding the transaction.
Pricing on the deal is said to be in the region of 1.3%.
The loan is being guaranteed by US Exim, and is for the sale of General Electric (GE) diesel locomotives to the state-owned freight logistics group. US Exim’s involvement was confirmed in February 2011.
In total, 100 locomotives will be sourced from GE, although the Nedbank-funded transaction is for the first 47 of these.
The second stage of the deal (the remaining 53 locomotives) will be funded before the end of the year. GTR’s sources say that final approval is likely to be obtained in September, and that opportunities exist for other banks to get involved in financing this portion.
Locomotive kits for the C30-ACi locomotives are being imported from the US, with final assembly performed in South Africa.
“We are extremely proud to have successfully concluded this important transaction. The locomotives form part of Transnet’s Market Demand Strategy (MDS) which is aimed at investing about R300bn over the next seven years with most of the locomotives being built in South Africa, thus enabling economic growth, skills development and job creation,” says Philna Potgieter, head of export credit finance at Nedbank Capital.
The MDS is aimed at expanding South Africa’s rail, port and pipelines infrastructure, resulting in a significant increase in freight volumes, especially in commodities such as iron ore, coal and manganese. It will also lead to a significant modal shift from road to rail.
According to a statement issued by Transnet, rail volumes during the seven-year period will increase from approximately 200 million tonnes to 350 million tonnes.
Of the R300bn capital investment programme, R205mn will be allocated to rail projects and R151bn to general freight.