JOHANNESBURG - The Land and Agricultural Development Bank of South Africa (Land Bank) has raised R1billion in a bond auction with new investors showing keen interest.
The bank said its team had gone into the auction with a target of raising R750 million last month with an option to upsize the issue allocation to R1bn. Chief financial officer Bennie van Rooy said the total value of bids received rose to R5.1bn, with more than 90 percent falling within pricing guidance.
“The bank managed to clear all three notes (one-, three- and five-year tenures) below pricing guidance, effectively securing listed debt financing at significantly cheaper rates than six months earlier,” he said. The bond auction comes after the bank reported a 10 percent rise in net interest income to R1.3bn in August for the period to end March.
This was up from R1.1bn recorded during the corresponding period last year. The bank also reported a 13percent increase in net profit to R347m. The strong performance came against subdued conditions in the agricultural industry, which included the worst drought in a century and a contracting economy marred by volatile exchange rates affecting commodity prices.
However, the agricultural sector received a boost last week when second quarter agricultural gross domestic product (GDP) figures showed that it had grown by 33.6percent in the second quarter of the year. In June, the bank received a $300m loan facility with a 10-year maturity period. The facility was backed by the Multilateral Investment Guarantee Agency (Miga), the political risk insurance and credit enhancement arm of the World Bank Group.
The Land Bank said at the time that the loan was facilitated by Standard Chartered, which would also act as a book runner, and that the funds would play a huge role in supporting farmers in South Africa. Van Rooy said this week that the bank had attracted five new major asset manager investors into the book, three of whom received allocations on the day.
He said the Land Bank had worked hard to improve corporate governance over the last 18 months, putting in place the necessary systems and processes as well as capacitating its workforce to be able to deliver consistently against stringent targets. “Initiatives have included the implementation of a revised code of conduct and code of ethics policies, as well as the adoption of a politically exposed persons’ policy,” Van Rooy said.
The bank has played a pivotal role in developing emerging farmers with R2bn made available during the year through its developmental sector to support emerging farmers. Van Rooy said they were delighted at the increased appetite for Land Bank credit, which showed a clear recognition of the bank’s good work, particularly around maintaining strong levels of corporate governance.
“This is especially significant as the bank does not receive any direct financial subsidies from the government and has to raise money directly from the capital markets on an unguaranteed basis to drive its mandate of facilitating economic transformation and social inclusivity in the agricultural sector,” he said. “With greater interest from the markets, we are confident we will be able to make significant strides in the achievement of our objectives.”