FirstRand Sells 1.5 Billion Rand of 10-Year Floating-Rate Bonds
FirstRand Ltd. (FSR), South Africa (SBK)’s second-largest bank, raised 1.5 billion rand ($170 million) in the first sale by one of the nation’s lenders of bonds that can be used to boost capital in terms of Basel III rules.
Investors bid for 3.8 billion rand of the securities, which were priced at 290 basis points above the Johannesburg interbank agreed rate, Andries du Toit, FirstRand’s treasurer, said by phone from Johannesburg today. Standard Bank Group Ltd. sold 3.5 billion rand of floating-rate notes that are not compliant with Basel III in October at a spread of 235 basis points above Jibar. Three-month Jibar was unchanged at 5.13 percent as of 2:04 p.m. local time.
FirstRand canceled a sale of dollar-denominated Basel III- compliant bonds last month after demand for the debt reached 1.2 times supply, less than the lender’s target for three-times oversubscription. Under the new rules, the debt may be converted to equity or written off by regulators to avoid bankruptcy. The extra time local investors had to “get their heads around the new instrument” probably helped build appetite, Du Toit said.
“It was slightly over what we expected but we think it was a fair price given that it’s a new instrument,” he said. “We indicated previously that the premium over the old-style bonds is between 50 and 100 basis points.”
FirstRand postponed the sale of 10-year $300 million to $500 million of debt priced to yield 5.875 percent on Nov. 16. The sale was pulled after FirstRand marketed the notes to U.K. and Asian investors a day after Gold Fields Ltd., South Africa’s second-largest producer, was downgraded to junk by Standard & Poor’s amid concerns of more social and political tension in Africa’s largest economy.
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