Johannesburg - Transaction Capital, which finances minibus taxis used by millions of commuters, is seeking a bank loan so it can extend credit to plumbers and gardeners to buy bakkies.
The company planned to take a syndicated loan of as much as R150 million this year, chief executive David Hurwitz said this month.
That was after spending R60m in a pilot project to finance bakkies for mainly black entrepreneurs over the past 12 months, he said.
Transaction Capital provided R5.5 billion of funding through its SA Taxi Finance unit for minibus taxis, the main mode of transport for most black people since apartheid, which forced non-whites to live in townships on the outskirts of cities.
If the firm could run a profitable bakkie business, it would be “worth investing in”, Andrew Canter, the chief investment officer at Futuregrowth Asset Management, said.
Transaction Capital “has been a profitable organisation which has managed SA Taxi very well, so they have good credentials”, Canter said last week. “The challenge is to prove it and build a track record.”
SA Taxi had raised R2bn last year, including bonds, structured finance and syndicated loans from offshore development finance institutions, Transaction Capital chief financial officer Mark Herskovits said.
The average cost of funding last year was 10.1 percent, he said, declining to provide more detailed pricing.
SA Taxi financed 23 453 minibus taxis in the 12 months to September last year with an average loan of R268 479.
“If the syndicated loan is similar to SA Taxi’s bonds and structures, then it would be priced from about 350 basis points to 450 basis points” over the three-month Johannesburg interbank agreed rate for the bakkie financing, Bronwyn Blood at Cadiz Asset Management said. “The spreads have narrowed on SA Taxi as people have become more comfortable with it.”
In the past 12 months, four syndicated loans totalling $1.3bn (R14bn) have been signed for development funding in Africa, according to data compiled by Bloomberg.
The borrowers included the Bakubung platinum mine project, a unit of Wesizwe Platinum, which took a $650m loan from China Development Bank at 350 basis points above the London interbank offered rate for six months.
SA Taxi’s class A notes were confirmed at A3, the fourth-lowest investment grade, by Moody’s Investors Service in August last year. Transaction Capital’s bakkie financing, with the syndicated loan probably a secured structure, “could be right up at the top in terms of credit ratings”, Bruce Stewart, the head of debt origination at Nedbank Capital, said.
The syndicated loan would allow Transaction Capital to finance 30 bakkie deals a month for the following 18 months, Hurwitz said early this month.
The company typically charged annual interest rates of 18 percent to 26 percent on five-year bakkie loans that averaged R260 000, he said.
The Reserve Bank kept its repo rate at 5.5 percent last week, while saying it might raise borrowing costs in future to curb an inflation rate that threatens to exceed its target.
Funding bakkies will support entrepreneurs and help spur economic growth that slowed to a four-year low last year.
Transaction Capital gained 1.98 percent to close at R5.15 on Friday. – Bloomberg