Transport parastatal Transnet Limited announced on Tuesday that it has successfully established its $2-billion Global Medium-Term Note Programme (GMTN) on the London Stock Exchange, heralding a new milestone in the implementation of its plan to fund its R80.5-billion infrastructure investment programme.

The GMTN will enable the state-owned freight transport and logistics company to issue notes/bonds in either the United States or European Debt Capital Markets when market conditions are favourable and cost competitive.

With the GMTN in place, Transnet does not have to go through the cumbersome, lengthy and costly process associated with preparing the legal documentation required for listing a bond each and every time Transnet wishes to raise debt funding.

Commenting on the milestone, Acting Group Chief Executive, Chris Wells, says: "This achievement will enable us to tap international markets to complement our R30-billion Domestic Medium-Term Note Programme (DMTN). Crucially, it will help us to further diversify our sources of funds – a key objective of our funding strategy."

First to tap global markets

Through the launch of the GMTN, Transnet will become the first South African state-owned enterprise to tap international markets without an explicit government guarantee in recent years. The new Transnet is a self-funding entity which receives neither government subsidy nor explicit government guarantees. It borrows on the strength of its balance sheet.

While Transnet is confident that it offers an attractive investment proposition, the company is planning road shows in key centres in both the US and UK to assess investor appetite for a possible debut issue.

"We are confident of the attractiveness of our portfolio of projects and, with the successful establishment of the GMTN, we have met some of the most stringent governance and disclosure standards in terms of Regulation S 144A (as required for any company wishing to issue notes to the US investor community).

"We believe investors will find Transnet's offering compelling given their drive for infrastructure investment in well-managed companies in developing countries with sound economic management," Wells adds.

Transnet plans to raise about R35-billion in the medium term to fund its capital investment programme.

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