South Africa Raises $5B In Its Largest-Ever Eurobond Sale

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Written by Peter Pedroncelli
South Africa Eurobond
The South African government raised $5 billion from the sale of two new bonds on international markets. South African President Cyril Ramaphosa, left, takes the national salute, alongside his wife Tshepo Motsepe, right, on their arrival for the State of the National Address at parliament in Cape Town, South Africa, Thursday June 20, 2019. (AP Photo/ Pool)

The South African government has raised $5 billion from the sale of two new bonds in international markets — $1 billion more than it had originally planned.

Africa’s most developed economy recorded 3.1 percent growth in the second quarter of 2019 which was unexpected after a first-quarter contraction.

The bonds were sold on Sep. 23 in two tranches, raising $2 billion from 10-year notes with a 4.85 percent coupon and $3 billion from 30-year notes with 5.75 percent coupon, according to the South African government.

The $5 billion represents South Africa’s biggest Eurobond sale to date and 25 percent more than initially anticipated.

The South African government sees the success of the transaction “as an expression of investor confidence in the country’s sound macro-economic policy framework and prudent fiscal management,” according to the government statement.

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In May 2018, South Africa issued $2 billion of 12- and 30-year debt on the Eurobond market, Biznews reported.

“Due to favorable pricing and a sizeable order book, the republic was able to pre-fund an additional $1 billion over the planned $4 billion,” the South African Treasury said in a statement.

South African Eurobond oversubscribed

The transaction was 2.71 times oversubscribed with interest from insurance and pension funds, financial institutions, hedge funds, and others, according to Businesstech.

Investors came from Europe, North America, Asia, South America, the Middle East, and Africa.

Credit rating agency Moody’s rates South Africa just above sub-investment grade while S&P Global Ratings and Fitch Ratings rates it at sub-investment grade — sometimes referred to as “junk status”.