Zambia Railways Plans $500 Million Bond to Expand Network
Zambia Railways Ltd., the state-owned operator, plans to sell a $500 million-dollar bond as it joins at least three other government companies and municipalities issuing more than $4 billion in debt this year.
Zambia’s maiden $750 million Eurobond, which saw 24 times more demand than government sought to raise, has encouraged local companies, including the Roads Development Agency, Zesco Ltd., and the Lusaka City Council to follow.
“From what I’ve seen so far I think we can raise half a billion,” Regina Mwale, finance director at Kabwe-based Zambia Railways, said in an interview yesterday. “We’re thinking within the next six months.”
Barclays Plc (BARC), which was the joint bookrunner with Deutsche Bank AG for Zambia’s Eurobond it sold in September, “has suggested to us they’re ready to help,” she said. Zambia Railways has also had informal talks with Citigroup Inc. (C)’s local unit over the planned listing on the Lusaka Stock Exchange, said Mwale, without giving a timeline for an initial public offering.
Before embarking on a debt sale, the company will revalue its assets, as this has not occurred for the past 25 years, she said.
President Michael Sata in September canceled a contract with Railway Systems of Zambia and New Limpopo Bridge Projects Investment Ltd. to operate a 1,200-kilometer (746 mile) stretch of network. He restored it to the government’s Zambia Railways, and appointed Clive Chirwa, then a professor at the U.K.’s Bolton University, as chief executive officer.
The stations and train tracks are “not fit for purpose”, and Zambia Railways will spend $1.5 billion refurbishing and expanding the system over the next five years, Chirwa said in a speech yesterday in Lusaka, the capital of Africa’s biggest copper producer.
The company will raise part of this through offering shares to the Zambian public, and will list on an international stock exchange at a later stage, Chirwa said in an interview. Lenders from the U.K., U.S. and China have also approached Zambia Railways over possible funding deals, he said, declining to identify them.
The country’s Road Development Agency is seeking to raise $1.5 billion in a bond sale to fund construction and repairs, Bernard Chiwala, the chief executive officer, said Jan. 16. He discussed the proposal on Jan. 29 with Finance Minister Alexander Chikwanda, who “wants to go ahead with it fairly soon,” Chiwala said in an interview in Lusaka yesterday. The government-owned company will probably advertise for advisers and bookrunners in March, he said.
The yield on the Zambian government’s 5.375 percent dollar bonds due September 2022 rose 6 basis points, or 0.06 percentage points to 5.16 at 3:19 p.m in Lusaka, the highest since Jan. 7. The kwacha weakened 1.1 percent to 5.39 percent against the dollar, extending its decline this week to 3.3 percent, the second-worst performer on the continent.
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