SANRAL’s ninth bond auction, since e-tolling began in December 2013, did not go as well as expected when it failed to raise its targeted R600 million on 4 February.

The non-payment of e-tolls is the main reason for the roads agency’s credit outlook, while the non-portfolio, which covers 85% of the national road network, remains healthy.

SANRAL’s CFO, Inge Mulder, says they only managed to raise R400 million at acceptable spreads. However, spreads widened because of the increased risk as to pay out even though payment is guaranteed. The total bids offered were R621 million with even wider spreads.

This is how the R400 million was allocated:
Hway23- R200 million @ 33 bps (CPI linked)
Hway24- R200 million @ 33 bps (CPI linked)

This is a result of continuous uncertainty regarding e-toll as well as the recent change in outlook by international ratings agency, Moody’s, from stable to negative.

The government guarantee provides sufficient confidence to investors, to still invest to a limited extent in SANRAL. The risk in timing of receipt of their funds is, but the risk in timing of receipt of their funds is addressed through the widening of spreads.

Mulder said that the uncertain policy climate around e-tolls and the resulting increase in cost of borrowing has impacted negatively on the confidence of an investor. If SANRAL is unable to pay its debt, there is a possibility that investors would demand the full debt repayment of R42 billion.

Government will have to borrow the funds and as a result, increasing the deficit which may lead to further downgrades.

Watch as Inge Mulder explains