SA to score lowest dollar-bond yields with debut sukuk

SOUTH Africa is set to earn its lowest dollar-borrowing costs with a debut Shariah-compliant bond, opening the way for state-owned firms to tap a growing Muslim investor base, it emerged yesterday. The $500 million (R5.5bn) of 5.75-year securities are expected to price to yield 3.9 percent, at the lower end of the range marketed to investors, according to a person familiar with the matter. That is the lowest coupon out of 14 dollar bond issues since 1994. The sale will probably prompt more African nations and firms to follow, according to Linklaters, a London-based law firm. Eskom and Transnet have said they might tap the Islamic finance market. “The South African sovereign sukuk represents an important milestone for the development of Islamic finance in African markets,” Richard O’Callaghan, a partner at Linklaters, said. “Once sovereigns have demonstrated the viability of a local framework, showing there is a robust legal and tax system in place to allow deals to happen, it should pave the way for corporates to do something similar.” – Bloomberg