Johannesburg - Super Group Ltd., the South African operator of truck fleets, plans to sell bonds at cheaper rates than it’s paying for bank loans after winning an investment- grade credit rating following a recovery from near collapse.
The company expects to sell 750 million rand ($73.6 million) of securities maturing in three to five years for as much as 1.5 percentage points lower than the 8 percent it pays for bank funding, Nigel Redford, Super Group’s company secretary, said in an e-mailed response to questions on August 26.
Imperial Holdings Ltd., a South African competitor, raised 750 million rand at 6.6 percent in March, while SIXT AG., a Swiss car rental company, paid 3.75 percent for euro-denominated notes.
Super Group is accessing the debt market about four years after being forced to raise 1.2 billion rand through a rights offer to stave off failure, according to filings with the Johannesburg Stock Exchange.
The recovery, led by different management, was rewarded last month with a ‘zaA’ rating from Standard & Poor’s, five levels above junk.
“From a financial perspective, the company is sound,” Abri du Plessis, who helps manage about 4 billion rand of assets at Gryphon Asset Management (Pty) Ltd., said in a phone interview yesterday.
He plans to bid for the bonds, he said. “Likelihood of default is low.”
Super Group’s 2 billion rand domestic medium-term note program is being considered by the Johannesburg Stock Exchange, according to Redford.
The company is planning roadshows this month to assess prices and will use proceeds from the sale to fund acquisitions in South Africa, he said.
The company owns 24 car dealerships in Africa’s biggest economy, according to its website, while its fleet business also has units in Australia, New Zealand and the UK.
Full-year earnings per share, excluding one-time items, rose 19 percent to 2.13 rand in the 12 months through June, the company said on August 20. Sales advanced 15 percent to 11.7 billion rand.
Super Group “needs the medium-term note program to diversify borrowing sources and to assist in funding expansion through a variety of means, including acquisitions,” Arnold Werbeloff, a transport analyst at Johannesburg-based Vunani Securities Ltd., said in a phone interview yesterday.
S&P’s, which initiated coverage on the stock this year, said Super Group was in the “later stages” of a turnaround strategy.
“We believe that acquisitions will form an integral part of the group’s expansion over the next couple of years,” the ratings company said in an August 20 statement.
Super Group shares have advanced 32 percent this year, valuing the company at about 7 billion rand.
The stock has outpaced the 165-member FTSE/JSE Africa All-Share Index, which gained 8.8 percent in the period. Imperial Holdings, owner of the biggest car dealership network in South Africa, increased 6.8 percent.
Yields on South African government debt due December 2026 fell three basis points, or 0.03 percentage point, to 8.44 percent by 6:11 p.m. yesterday in Johannesburg, after reaching the highest since January 2012 on August 22.
The rand strengthened 0.3 percent to 10.2464 per dollar. It has fallen 17 percent against the dollar this year, the worst performer of 16 major currencies tracked by Bloomberg.
“Super Group is in a much better position than three years ago,” Vunani’s Werbeloff said.
“It has had very good results and has beaten market forecasts.” The brokerage has a buy rating on the stock, he said. - Bloomberg News