CT City could enter bond business

The City of Cape Town would pursue the option of issuing its own municipal bonds as an alternative source of capital funding, the city announced on Wednesday.

"The Finance Portfolio Committee has now asked the City's Treasury Department to initiate a process to establish a five year Domestic Medium Term Note (DMTN) programme which will lead to the eventual issue of City of Cape Town municipal bonds, City of Cape Town mayoral committee member for finance Ian Neilson said in a statement.

The 2nd city after Johannesburg

Should the city succeed in its plans, it would become the second metro in the country to have launched such an initiative after the City of Johannesburg did so in 2004.

Neilson said the city's decision to access the South African bond market was influenced by loan agreement conditions, which he said had become stringent.

"The establishment of a five-year DMTN programme would provide the city with a cost-effective funding mechanism, and the flexibility to issue municipal bonds at short notice to meet its funding requirements.”

He said preliminary investigations indicated that an initial bond issue by the City of Cape Town in the range of between R500-million and R1-billion over a maximum maturity of 10 years would be well received by the capital market.

The city's current external borrowings for R2.3-billion are sourced mainly from the commercial sector and the Development Bank of SA.

"Cape Town's access to this well-developed market would greatly expand its borrowing options, reduce its average cost of borrowings, and enhance its profile in financial markets,” said Neilson.

Sapa

Article from: www.iafrica.com