FIXEDTECHNICAL INCOME STRATEGY NOTE: TCREDIT|SOUTHTECHNICALECHNICAL STRATEGY STRATEGY AFRICANOTE :EQUITIESNOTE: EDCMEQUITIESQUITIES TRENDS – FEBRUARY 1515 March March 2019 2019 15 March 2019
NTHULLENGMEHUL DAYA MPHAHLELE NEELS HEYNEKE MehulAnalystStrategy: Daya Research Analyst Neels SeniorHeyneke Strategist Strategy:Tel:Tel +27 : +27 Research11 11 537 295 4163 Analyst 8838 SeniorTel Strategist : +27 11 535 4041 TelNthullengM@Nedbank[email protected] : +27 11 295 8838 Tel : [email protected] 11 535 4041 [email protected] [email protected] TABLE OF CONTENTS
Pg. 1. Issuance Volumes 3 2. Redemptions 14 3. Spread Development 17 4. Ratings Distribution 19 5. Contacts 20
ACCESS: CREDIT DATABOOK
DISCLAIMER
The information furnished in this report, brochure, document, material, or communication (“the Commentary”), has been prepared by Nedbank Limited (acting through its Nedbank Corporate and Investment Banking division), a registered bank in the Republic of South Africa, with registration number: 1951/000009/06 and having its registered office at 135 Rivonia Road, Sandton, Johannesburg (“Nedbank”). The information contained herein may include facts relating to current events or prevailing market conditions as at the date of this Commentary, which conditions may change and Nedbank shall be under no obligation to notify the recipient thereof or modify or amend this Commentary. The information included herein has been obtained from various sources believed by Nedbank to be reliable and expressed in good faith, however, Nedbank does not guarantee the accuracy and/or completeness thereof and accepts no liability in relation thereto.
Nedbank does not expressly, or by implication represent, recommend or propose that any securities and/or financial or investment products or services referred to in this Commentary are appropriate and or/or suitable for the recipient’s particular investment objectives or financial situation. This Commentary should not be construed as “advice” as contemplated in the Financial Advisory and Intermediary Services Act, 37 of 2002 in relation to the specified products. The recipient must obtain its own advice prior to making any decision or taking any action whatsoever.
This Commentary is neither an offer to sell nor a solicitation of an offer to buy any of the products mentioned herein. Any offer to purchase or sell would be subject to Nedbank’s internal approvals and agreement between the recipient and Nedbank. Any prices or levels contained herein are preliminary and indicative only and do not represent bids or offers and may not be considered to be binding on Nedbank. All risks associated with any products mentioned herein may not be disclosed to any third party and the recipient is obliged to ascertain all such risks prior to investing or transacting in the product or services. Products may involve a high degree of risk including but not limited to a low or no investment return, capital loss, counterparty risk, or issuer default, adverse or unanticipated financial markets fluctuations, inflation and currency exchange. As a result of these risks, the value of the product may fluctuate. Nedbank cannot predict actual results, performance or actual returns and no guarantee, assurance or warranties are given in this regard. Any information relating to past financial performance is not an indication of future performance.
Nedbank does not warrant or guarantee merchantability, non-infringement or third party rights or fitness for a particular purpose. Nedbank, its affiliates and individuals associated with them may have positions or may deal in securities or financial products or investments identical or similar to the products.
This Commentary is available to persons in the Republic of South Africa, financial services providers as defined in the FAIS Act, as well as to other investment and financial professionals who have experience in financial and investment matters.
All rights reserved. Any unauthorized use or disclosure of this material is prohibited. This material may not be reproduced without the prior written consent of Nedbank, and should the information be so distributed and/or used by any recipients and/or unauthorized third party, Nedbank disclaims any liability for any loss of whatsoever nature that may be suffered by any party by relying on the information contained in this Commentary.
Certain information and views contained in this Commentary are proprietary to Nedbank and are protected under the Berne Convention and in terms of the Copyright Act 98 of 1978 as amended. Any unlawful or attempted illegal copyright or use of this information or views may result in criminal or civil legal liability.
All trademarks, service marks and logos used in this Commentary are trademarks or service marks or registered trademarks or service marks of Nedbank or its affiliates.
Nedbank Limited is a licensed Financial Services Provider and a Registered Credit Provider (FSP License Number 9363 and National Credit Provider License Number NCRCP 16).
DCM TRENDS 15 MARCH 2019| PAGE 2 ISSUANCES
BOND AND COMMERCIAL PAPER ISSUANCES
This section provides an analysis of bond issuance volumes, for a given period of time. An analysis is made, on a volume basis, of . Total bonds issued over the past 10 years, to determine the issuance trend and market depth . Bond issuances by tenor bucket, as an indicator of maturity transformation in the bond market . New vs tap issuances . A comparison of market size of the vanilla bond market and structured or credit-linked notes (excluding securitisations), to establish a more complete picture of the credit opportunities in the market from an investor’s point of view . We also keep track of the top ‘vanilla’ bond issuances, to ascertain the level of concentration in particular names or sectors, and also to determine the direction of the liquidity trend . Monthly CP issuances over the past three years, to track the short-term credit market
DCM TRENDS 15 MARCH 2019| PAGE 3 BOND ISSUANCES Issuance Trend
EXECUTIVE SUMMARY
Vanilla Bonds: R19.63bn Securitisation: R0.01bn 2019 Total Bond Issuance Forecast: R120bn Issuances are starting to gain traction, with R16.51bn issued in the month of February and banks taking up most of 2019 YTD Total Issuance the liquidity. Standard Bank Group issued an additional tier 1 capital instrument (SBT103), raising R1.942bn (initial Volume: issuance target was R1.5bn) at 440bps above 3m Jibar. Redefine was the first corporate issuer to tap the market, via auction, successfully raising R1.097bn across the 3yr, 5yr and 7yr tenor buckets. Several other corporates subsequently tapped the market, via private placements, issuing a total of R3.7bn and MBSA making up R2bn (54%) of the volume. The Industrial Development Corporation also raised R1.15bn through a private placement of IDCG17 (R1bn), and its existing note IDCG16 (R0.15bn) was tapped. Floating rate notes remain favoured over fixed rate notes.
Commercial Paper: R8.7bn
Auction Summary . R5.239bn in bids received, R2.982bn issued (1.76 times oversubscribed) . All issued notes cleared at the bottom end of price guidance and at levels similar to Standard Bank’s and ABSA’s senior unsecured notes issued in January and February, respectively . From a bid/volume perspective, the 5yr tenor bucket seems to be the most favoured with respect to bank credit appetite. All four major banks have now come to market (via auction) offering senior unsecured notes; the 5yr note received the highest volume of bids compared to other tenor sectors on offer (see page 7 for further analysis)
Auction Summary . R2.864bn in bids received, R1.942bn issued (1.33 times oversubscribed) . Summary of key stats
Issued Amount Bid-cover Ratio Bond Code (Rbn) (times) Price Guidance Clearing Spread Auctions PerpNC5 1.942 1.33 435-455 440
Auction Summary . R6.025bn in bids received, R2.864bn issued (2.1 times oversubscribed) . Notes also cleared at the lower end of price guidance, similar to FirstRand’s earlier auction . Notably, Nedbank’s 7yr (NBK53B) and 10yr (NBK54B) notes cleared 2bps tighter than comparable issuances by peer banks
In our view, issuers continue to benefit from spread compression on the basis that credit demand continues to outweigh the supply thereof. We do not expect to see any meaningful changes in credit supply to fill the gap left by former frequent issuers such as Eskom, Transnet and SANRAL. SANRAL has now lifted its self-imposed moratorium on bond issuances. Nevertheless, we expect a cautious and measured re-entry to the DCM. It is reported that the agency will first approach private investors for funding, while it works with the government to resolve e-toll issues, especially in the face of stiff political resistance by the ANC in Gauteng of the re-instatement of e-tolls.
Source: JSE, Bloomberg, Nedbank CIB
DCM TRENDS 15 MARCH 2019| PAGE 4 BOND ISSUANCES Issuance Trend
EXECUTIVE SUMMARY
Date: 13 March 2019 Issue up to R0.75bn through its unsecured subordinated note programme. A floating rate 10.5NC 5.5yr note is up for offer Price Guidance (above 3m Jibar) 170-185bps
Date: 14 March 2019 Issue an AT1 perpetual instrument with a 5.5yr redemption option of R1.5bn with an option to upside to R2bn Price Guidance (above 3m Jibar) 440-455bps
Date: 14 March 2019 Issue up to R600m senior unsecured notes across the 3yr and 5yr tenor buckets Price Guidance (above 3m Jibar) 3yr TFS158: 100-110bps 5yr TFS159: 115-125bps
Date: 15 March 2019 Issue up to R1bn across 6-month and 12-month commercial paper Price Guidance (above 3m Jibar) 6-month TLC07: 60-65bps 12-month TLC08: 90-100bps Scheduled Auctions
Date: 18 March 2019 Issue up to R500m across three senior unsecured notes with the ability to upsize to R750m Price Guidance (above 3m Jibar) 3yr RDFB19: 125-135bps 5yr RDFB20: 150-160bps 7yr RDFB21: 170-180bps
Date: 18 March 2019 Transnet is resuming with its regular, monthly commercial paper auctions, across 3-, 6- and 12-month tenors; and referencing 3-, 6- and 12-month Jibar respectively. Auction amounts are R200m. See <
Date: 19 March 2019 Issue R500m senior unsecured notes with an option to upsize across the 3yr and 5yr tenor buckets Price Guidance (above 3m Jibar) 5yr IPF30: 160-170bps 7yr IPF31: 180-190bps
Source: Nedbank CIB
DCM TRENDS 15 MARCH 2019| PAGE 5 BOND ISSUANCES Issuance Trend
Long-term New/Tap Issuance Trend Banks have been the 160 driving force of 1Q19 issuances, having issued a total of 140 R14.66bn in both senior unsecured and AT1 notes 120
100
80 Issuance Volume (Rbn) 60
40
20
0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019YTD SOC Municipalities Corporates Financials Securitisation 2019 Forecast
YoY Monthly New/Tap Issuance Comparison – By Sector
20
18 R16.51bn
16
14
12 R10.78bn 10
R7.6bn
Rbn 8
6
4 R3.12bn
2
0 Jul-18 Jul-19 Jan-18 Jan-19 Jun-18 Jun-19 Oct-18 Oct-19 Apr-18 Apr-19 Feb-18 Feb-19 Sep-18 Sep-19 Dec-18 Dec-19 Aug-18 Aug-19 Nov-18 Nov-19 Mar-18 Mar-19 May-18 May-19 SOC Municipalities Corporates Financials Securitisations
Source: JSE, Bloomberg, Nedbank CIB
DCM TRENDS 15 MARCH 2019| PAGE 6 BOND ISSUANCES Issuance Trend
Analysis 2019YTD New/Tap Issuances Feb 2019 vs Jan 2018 New/Tap Issuances by Sector (Vanilla Bonds)
2.13% 2019YTD R20.08bn 0% 6% 0%
16.08% 3% 17% 19% 24.86%
12.73% 17% 2018YOY R19.62bn R18.34bn
75% 63% 44.20%
1- 3 Years 3-5 Years 5-7 Years 7-10 Years 10-20 Years SOC Municipalities Corporates Financials Securitisation
NOTE: Pricing tenor was used Bonds <1 year are bonds callable in a year
Source: JSE, Bloomberg, Nedbank CIB
DCM TRENDS 15 MARCH 2019| PAGE 7 BOND ISSUANCES Issuance Trend
February Auction Bid Distribution and Allocation Average Bid-Cover Average Bid-Cover Ratio Ratio Jan-19 Feb-19 3.0 4.5 3-Years - 2.6 3.89 5-Years 2.02 2.06 4.0 7-Years 1.6 1.92 2.5 10-Years 1.75 1.20 3.5 2.97 2.0 3.0 2.48 2.24 2.5 2.09 2.07 2.13 1.5 2.02 2.03 1.83 1.75 1.60 2.0 1.42 1.24 1.33 Rbn 1.0 1.18 1.16 1.15 1.17 1.5 Times (x) 1.0 0.5 0.5
0.0 0.0 SBS62 SBS63 SBS64 FRJ22 FRJ24 FRJ26 FRJ29 SBT103 RDFB16 RDFB17 RDFB18 ABFN34 ABFN35 ABFN36 ABFN37 NBK51B NBK52B NBK53B NBK54B Feb Jan Feb Jan Feb Jan Feb Feb 3-Years 5-Years 7-Years 10-Years Perp.NC5 Bids Received Allocated Bids Bid-Cover Ratio
. R11.69bn (71%) of the R16.51bn issued in February was issued via auction, with banks taking up most of that credit appetite . So far in CY2019, auctions have been well supported, with a total of R26.65bn received in bids and just over half of that being allocated at R14.70bn. In our view, issuers (predominately banks) are benefiting from pent-up demand for corporate credit . All four major banks have come to market this year offering senior unsecured notes across the 3yr, 5yr, 7yr and 10yr tenor sectors. Support for bank paper has been largely concentrated in the 3yr and 5yr tenor buckets. Below is an analysis of bank senior unsecured auction outcomes:
Bids Received (Rbn) Allocated Bids (Rbn) Bid-Cover Ratio (Times) 3-Years 5.41 2.29 2.37 ABFN34 2.24 1.23 1.83 NBK51B 1.89 0.49 3.89 FRJ22 1.28 0.57 2.24 5-Years 9.07 4.10 2.21 ABFN35 2.28 0.77 2.97 SBS62 2.03 1.01 2.02 NBK52B 2.44 1.20 2.03 FRJ24 2.33 1.13 2.07 7-Years 3.73 2.12 1.76 ABFN36 0.83 0.34 2.48 SBS63 1.62 1.01 1.60 NBK53B 0.57 0.27 2.13 FRJ26 0.72 0.51 1.42 10-Years 4.33 3.16 1.37 ABFN37 0.55 0.47 1.15 SBS64 1.74 1.00 1.75 NBK54B 1.13 0.91 1.24 FRJ29 0.91 0.78 1.17 Total 22.54 11.66 1.93 Source: JSE, Bloomberg, Nedbank CIB
DCM TRENDS 15 MARCH 2019| PAGE 8 BOND ISSUANCES Issuance Trend
Issuances Last 12 Months (LTM) – Vanilla Bonds and CLNs
25 Bonds (Vanilla) Structured Notes Total LTM (Rbn) 98.64 22.01
20
1.35 6.11
15
1.60
10 1.16
Issuance Volume (Rbn) 17.1 0.57 2.56 0.74 1.63 2.90 13.7
11.3 0.94 5 9.3 7.8 7.9 7.6 1.84 6.8 0.62 6.1 4.8 2.9 3.1 0 Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb 2018 2019 Bonds (Vanilla) Structured Notes
CLN Issuance Volume Feb 2019 – By Reference Entity Name (R4.21bn)
1,600 9% 21% 2%
1,400 Corporates (excl. REITS) 1% Property 1,200 SOCs Sovereign 1,000 Banks
800
67% Issuances (Rm) Issuances 600
400
200
0 MBSA Remgro Anglo Redefine IDC Transnet Eskom TCTA RSA ABSA Nedbank American Plc Corporates (excl. REITS) Property SOCs Sovereign Banks
Source: JSE, Bloomberg, Nedbank CIB
DCM TRENDS 15 MARCH 2019| PAGE 9 BOND ISSUANCES – FEB 2019
Table 1: Financials
Bond Standardis Tap/Ne Date of Expected Pricing Amount Spread at Reference Coupon Code Issuer Name ed Rating w Issue Issue Maturity Tenor Issued (Rbn) Issue (bps) Benchmark Type Payment Rank Unsubordinated ABFN34 ABSA Bank Limited AA+ New 07-Feb-19 07-Feb-22 3 1.225 117 3m Jibar Floating unsecured Unsubordinated ABFN35 ABSA Bank Limited AA+ New 07-Feb-19 07-Feb-24 5 0.766 135 3m Jibar Floating unsecured Unsubordinated ABFN36 ABSA Bank Limited AA+ New 07-Feb-19 07-Feb-26 7 0.335 146 3m Jibar Floating unsecured Unsubordinated ABFN37 ABSA Bank Limited AA+ New 07-Feb-19 07-Feb-29 10 0.474 169 3m Jibar Floating unsecured Senior FRJ24 FirstRand Bank Limited AA+ New 14-Feb-19 14-Feb-24 5 1.125 135 3m Jibar Floating Unsecured Senior FRJ26 FirstRand Bank Limited AA+ New 14-Feb-19 14-Feb-26 7 0.506 145 3m Jibar Floating Unsecured Senior FRJ29 FirstRand Bank Limited AA+ New 14-Feb-19 14-Feb-29 10 0.777 169 3m Jibar Floating Unsecured Senior IBL123 Investec Bank Limited AA+ New 14-Feb-19 14-Feb-22 3 0.7 122.5 3m Jibar Floating Unsecured Senior IBL124 Investec Bank Limited AA+ New 14-Feb-19 14-Feb-24 5 0.165 140 3m Jibar Floating Unsecured Senior FRJ22 FirstRand Bank Limited AA+ Tap 14-Feb-19 07-Mar-22 3 0.554 155 3m Jibar Floating Unsecured Senior SBT103 Standard Bank Group Limited BBB Tap 20-Feb-19 31-Mar-24 5 1.942 440 3m Jibar Floating Unsecured
NBK51B Nedbank Limited AA+ New 21-Feb-19 21-Feb-22 3 0.486 116 3m Jibar Floating Unsubordinated Unsecured
NBK52B Nedbank Limited AA+ New 21-Feb-19 21-Feb-24 5 1.203 135 3m Jibar Floating Unsubordinated Unsecured
NBK53B Nedbank Limited AA+ New 21-Feb-19 21-Feb-26 7 0.265 143 3m Jibar Floating Unsubordinated Unsecured
NBK54B Nedbank Limited AA+ New 21-Feb-19 21-Feb-29 10 0.91 167 3m Jibar Floating Unsubordinated Unsecured Senior GBL03 Grindrod Bank Limited BBB+ Tap 21-Feb-19 16-Nov-20 2 0.015 300 3m Jibar Floating Unsecured Senior GBL04 Grindrod Bank Limited BBB+ Tap 21-Feb-19 05-Jun-21 2 0.027 300 3m Jibar Floating Unsecured
Table 2: SOCs
Bond Standardis Tap/Ne Date of Expected Pricing Amount Spread at Reference Coupon Code Issuer Name ed Rating w Issue Issue Maturity Tenor Issued (Rbn) Issue (bps) Benchmark Type Payment Rank Industrial Development Senior IDCG17 AA+ New 08-Feb-19 08-Feb-24 5 1 170 3m Jibar Floating Corporation of South Africa Unsecured Industrial Development Senior IDCG16 AA+ Tap 20-Feb-19 12-Nov-25 7 0,15 190 3m Jibar Floating Corporation of South Africa Unsecured
Source: JSE, Bloomberg, Nedbank CIB
DCM TRENDS 15 MARCH 2019| PAGE 10 BOND ISSUANCES – FEB 2019
Table 3: Corporates
Bond Standardis Tap/Ne Date of Expected Pricing Amount Spread at Reference Coupon Code Issuer Name ed Rating w Issue Issue Maturity Tenor Issued (Rbn) Issue (bps) Benchmark Type Payment Rank Calgro M3 Developments Subordinated CGR43 N/R New 08-Feb-19 08-Feb-22 3 0,018 395 3m Jibar Floating Limited Unsecured Senior RDFB16 Redefine Properties Limited AA+ New 11-Feb-19 11-Feb-22 3 0,25 130 3m Jibar Floating Unsecured Senior RDFB17 Redefine Properties Limited AA+ New 11-Feb-19 11-Feb-24 5 0,465 155 3m Jibar Floating Unsecured Senior RDFB18 Redefine Properties Limited AA+ New 11-Feb-19 11-Feb-26 7 0,382 175 3m Jibar Floating Unsecured Senior ENX04 enX Corporation Limited A- New 18-Feb-19 01-Mar-20 1 0,225 230 3m Jibar Floating Unsecured Senior MBP046 Vukile Property Fund Limited AAA New 26-Feb-19 26-Feb-22 2 0,15 155 3m Jibar Floating Unsecured Senior MBP047 Vukile Property Fund Limited AAA New 26-Feb-19 26-Feb-24 4 0,1 165 3m Jibar Floating Unsecured Senior VKE13 Mercedes-Benz South Africa A+ Tap 27-Feb-19 27-Aug-21 3 1,5 105 3m Jibar Floating Unsecured Senior VKE14 Mercedes-Benz South Africa A+ Tap 27-Feb-19 27-Aug-23 5 0,5 115 3m Jibar Floating Unsecured Senior GRT31 Growthpoint Properties AAA New 28-Feb-19 28-Feb-24 5 0,25 140 3m Jibar Floating Unsecured Senior PMM51 Premium Properties Limited A- New 28-Feb-19 28-Feb-22 3 0,045 185 3m Jibar Floating Unsecured
Source: JSE, Bloomberg, Nedbank CIB
DCM TRENDS 15 MARCH 2019| PAGE 11 CP ISSUANCES Issuance Trend
YoY Monthly CP Issuance Trend – February 2019 (R4.086bn)
5,000 4,610 4,490 4,500 4,262 4,086 4,108 4,000 3,699 3,653 3,446 3,500
2,903 3,000
2,500 2,366 2,340 Issuance Volume (Rm)
2,000 1,804 1,769 1,513 1,500
1,000
500
0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2018 2019YTD
CP Issuers YTD Issuance Volume YTD by Business Sector
(R8.7bn) SOCs, R0.06 3.5 Corporates Banks, (excl. REITS), R0.86 3.0 R0.55
2.5 Non-Bank Financial Institutions, Securitisation, R1.30 2.0 R5.60 Rbn Property, R0.33 1.5
1.0
0.5
0.0 Ivuzi Denel Redefine Nedbank Investec FirstRand Macquarie BNP PPFSA Investec PF Premium PF Fintegic (RF) Jasco Electronics Jasco Clinbed Investments Thekwini Warehouse
Banks Corporates (excl. Securitisation Non-Bank Financial Property SOCs REITS) Institutions
Source: JSE, Bloomberg, Nedbank CIB
DCM TRENDS 15 MARCH 2019| PAGE 12 BOND ISSUANCES – FEB 2019
Table 2: CP Issuances – Feb 2019
Expected Bond Code Tap/New Issue Date of Issue Maturity Pricing Tenor (Days) Amount Issued (Rbn) Spread at Issue (bps) Sector IVA889 Tap 01-Feb-19 09-May-19 97 0.315 Zero Coupon Securitisation
IVA890 New 05-Feb-19 16-May-19 100 0.330 Zero Securitisation
IVA888 Tap 06-Feb-19 02-May-19 85 0.011 Zero Coupon Securitisation
FRC287 New 08-Feb-19 01-Feb-20 358 0.400 200 Banks
FRC288 New 08-Feb-19 01-Feb-20 358 0.100 200 Securitisation
MAQ133 New 11-Feb-19 13-May-19 91 0.155 Zero Coupon Securitisation
FNT007 New 13-Feb-19 05-Mar-19 20 0.020 Fixed Securitisation
FNT008 New 14-Feb-19 14-Jun-19 120 0.011 Fixed Corporates (excl. REITS) Non-Bank Financial DENG90 Tap 13-Feb-19 31-Jan-20 352 0.030 175 Institutions IVA892 New 14-Feb-19 29-May-19 104 0.500 Zero Coupon Securitisation
TWC294 New 14-Feb-19 15-May-19 90 0.291 Fixed Securitisation
IVA892 Tap 15-Feb-19 29-May-19 103 0.050 Zero Coupon Property
MAQ134 New 19-Feb-19 22-Mar-19 31 0.900 Zero Coupon Property
IVA893 Tap 21-Feb-19 06-Jun-19 105 0.362 Zero Coupon Securitisation FNT009 New 25-Feb-19 07-May-19 71 0.014 Fixed Securitisation Non-Bank Financial TWC295 New 27-Feb-19 29-May-19 91 0.365 Fixed Institutions NNF01 New 28-Feb-19 28-Aug-19 181 0.157 Equity structured Corporates (excl. REITS)
PMM50 New 28-Feb-19 28-Feb-20 365 0.075 135 SOCs
DCM TRENDS 15 MARCH 2019| PAGE 13 REDEMPTIONS
BONDS SCHEDULED FOR REDEMPTION OR CALL This section provides an analysis of bonds that are maturing, separated into the following business sectors: . Financials . Corporates . SOEs Additional data is provided detailing upcoming auctions, or results of a recent auction by an issuer.
DCM TRENDS 15 MARCH 2019| PAGE 14 REDEMPTIONS – MAR TO MAY ’19
Summary Redemptions or Calls – By Sector . R28.7bn (42% of the total outstanding corporate bonds maturing in 2019) of bonds issued are scheduled for redemption or call over the next three months . Maturities are concentrated in the financial services sector, banks making up R14.94bn of the R16.44bn outstanding SOCs R4bn
Financials Corporates R16.44bn R8.26bn
Bonds callable/maturing 3.0 Anglo American is not a regular bond issuer; 2.5 the entity has not tapped the local DCM since April 2014 The Lesotho The Highlands 2.0 International Water business Project recently (WSP3) is tapped the currently Eurobond cash flush. (TCTA 1.5 market projects are ring-fenced; therefore, surplus cash Rbn TFSA has released a termsheet for an This is the only bond from one 1.0 auction scheduled for outstanding from project 14 March (see Executive MBSA privately Exxaro’s R5bn DMTN cannot be Summary for more placed R2bn this programme. The transferred details) month note was issued 5 to another years ago project. No 0.5 co-mingling.)
0.0 EQS05 enX WSP3 TCTA SBS24 SBSA SBS24 SBSA SBS25 AIR01 ACSA AIR01 AA05 Anglo DVF19 DBSA TFS123 TFSA TFS139 TFSA EXX02 Exxaro EXX02 ABFN12 Absa ABFN12 ABFN17 Absa ABFN17 IBL83 Investec IBL61 Investec IBL85 Investec IBL87 Investec COH002 Curro CBL25 Capitec CBL25 MBF049 MBSA MBF051 MBSA MBSA01 MBSA MBSA02 MBSA FIFB08 Fortress FRJ19 FirstRandFRJ19 VKE08 Vukile PF NED15 Nedbank NBK33B Nedbank BCJ14 Bank of China GRT10 Growthpoint MMIG01 MMI Group ABLS4 DebtABLS4 Services Residual RP006 Real People Investments Real People RP006
Mar Apr May
R7.289bn R5.59bn R15.82bn
Outstanding Amount. Issued Amount.
NOTE Empty bars above show early or partial redemptions ahead of Source: JSE, Bloomberg, Nedbank CIB the contractual maturity schedule of the note.
DCM TRENDS 15 MARCH 2019| PAGE 15 REDEMPTIONS – MAR TO MAY ’19
Table 3: Mar-May Scheduled Calls/Redemptions
Issued Amount Outstanding Amount % Outstanding Bond Code Issuer Sector (R) (R) Amount Issue Date Maturity Date
MBF049 Mercedes-Benz South Africa Pty Ltd Corporates 1,500,000,000 1,500,000,000 100% 2016/03/14 2019/03/14
AIR01 Airports Co South Africa SOCs 2,000,000,000 2,000,000,000 100% 2007/03/15 2019/03/15
MMIG01 MMI Group Ltd Financials 1,500,000,000 1,500,000,000 100% 2014/03/17 2019/03/17
Toyota Financial Services South Africa TFS123 Corporates 592,000,000 592,000,000 100% 2014/03/20 2019/03/20 Pty Ltd
AA05 Anglo American SA Finance Ltd Corporates 1,400,000,000 1,400,000,000 100% 2012/03/22 2019/03/22
IBL83 Investec Bank Ltd Financials 187,000,000 187,000,000 100% 2016/03/22 2019/03/22
ABLS4 Residual Debt Services Ltd Financials 300,000,000 0 0% 2012/03/29 2019/03/29
VKE08 Vukile Property Fund Ltd Corporates 110,000,000 110,000,000 100% 2016/03/29 2019/03/29
IBL61 Investec Bank Ltd Financials 167,000,000 167,000,000 100% 2014/03/31 2019/04/01
FRJ19 FirstRand Bank Ltd Financials 2,385,500,000 2,385,500,000 100% 2013/04/04 2019/04/04
NED15 Nedbank Ltd Financials 450,000,000 450,000,000 100% 2014/04/07 2019/04/08
NED15 Nedbank Ltd Financials 450,000,000 450,000,000 100% 2014/04/07 2019/04/08
ABFN12 Absa Bank Ltd Financials 631,000,000 631,000,000 100% 2014/04/09 2019/04/09
COH002 Curro Holdings Ltd Corporates 125,000,000 0 0% 2014/04/15 2019/04/15
MBSA02 Mercedes-Benz South Africa Pty Ltd Corporates 750,000,000 750,000,000 100% 2014/04/15 2019/04/15
MBSA01 Mercedes-Benz South Africa Pty Ltd Corporates 500,000,000 500,000,000 100% 2012/04/16 2019/04/16
EQS05 enX Corp Ltd Corporates 900,000,000 254,633,333 28% 2012/04/25 2019/04/25
RP006 Real People Investments Holdings Ltd Financials 50,000,000 0 0% 2012/04/17 2019/04/30
CBL25 Capitec Bank Ltd Financials 250,000,000 250,000,000 100% 2016/05/06 2019/05/06
BCJ14 Bank of China Ltd/Johannesburg Financials 755,000,000 755,000,000 100% 2017/11/09 2019/05/09
NBK33B Nedbank Ltd Financials 2,484,000,000 2,484,000,000 100% 2016/05/10 2019/05/10
GRT10 Growthpoint Properties Ltd Corporates 534,000,000 534,000,000 100% 2016/05/13 2019/05/13
ABFN17 Absa Bank Ltd Financials 312,000,000 312,000,000 100% 2016/05/17 2019/05/17
MBF051 Mercedes-Benz South Africa Pty Ltd Corporates 1,500,000,000 1,500,000,000 100% 2016/05/17 2019/05/17
EXX02 Exxaro Resources Ltd Corporates 520,000,000 520,000,000 100% 2014/05/19 2019/05/20
IBL85 Investec Bank Ltd Financials 1,596,200,000 1,567,200,000 98% 2016/05/20 2019/05/20
IBL87 Investec Bank Ltd Financials 190,500,000 190,500,000 100% 2016/05/20 2019/05/20
Standard Bank of South Africa SBS24 Financials 1,641,000,000 1,641,000,000 100% 2012/05/24 2019/05/24 Ltd/The
Standard Bank of South Africa SBS25 Financials 2,714,000,000 2,714,000,000 100% 2012/05/24 2019/05/24 Ltd/The
Toyota Financial Services South Africa TFS139 Corporates 350,000,000 350,000,000 100% 2016/05/27 2019/05/27 Pty Ltd
WSP3 Trans-Caledon Tunnel Authority SOCs 400,000,000 45,180,000 11% 2003/05/28 2019/05/28
Development Bank of Southern Africa DVF19 SOCs 1,950,000,000 1,950,000,000 100% 2016/05/31 2019/05/31 Ltd
FIFB08 Fortress REIT Ltd Corporates 250,000,000 250,000,000 100% 2016/05/31 2019/05/31
Source: JSE, Bloomberg, Nedbank CIB
DCM TRENDS 15 MARCH 2019| PAGE 16 SPREAD DEVELOPMENT
BOND SPREADS OVER TIME . In this section, we compare bond spreads at issue by tenor sector split. – In this market, the sectorial distinctions are broadly by economic activity and by tenor. We show financial institutions versus all other corporates (including SOCs, property companies, and other non-financial corporates). . We reflect the spreads in the way that investors tend to bid for comparable issuances. That is to imply that spread development is a function of relative credit quality, size of the issuance, and its maturity sector. If the new issuance is to roll existing debt, investors tend to look at the last clearing spread and adjust their bids for current market conditions from that baseline. – The lack of secondary market trading and market making in corporate debt results in inconsistent pricing functions or credit curves (which tend to be spurious at best). This is typically evidenced by the lack of correlation between national-scale credit ratings and credit spreads. Nevertheless, we think the general trend in spread development typically follows the banks and the swap curve with material credit-specific price dislocations typically isolated to credit events. . For more details on issue/issuer ratings and the notes’ characteristics, please see the DCM Databook.
DCM TRENDS 15 MARCH 2019| PAGE 17 SPREAD DEVELOPMENT Issuances by Tenor and Rating
February 2019 Issuances Spread Development – By Pricing Tenor and Standardised Rating
1.6 450 395 1.4 400
350 1.2
300 1.0 167 230 250 0.8 169 185 170 175 169 200 Spread (bps) Volume (Rbn) 155 0.6 140 140 145 143 146 130 135 135 135 122.5 116 117 115 150 105 0.4 100
0.2 50
0.0 0 ENX04 enX ENX04 IDCG17 IDC IDCG17 ABFN35 Absa ABFN35 Absa ABFN36 Absa ABFN37 ABFN34 Absa ABFN34 CGR43 Calgro MBP046 MBSA MBP046 MBP047 MBSA MBP047 FRJ24 FirstRand FRJ24 FirstRand FRJ26 FirstRand FRJ29 IBL124 Investec IBL123 Investec RDFB17 Redefine RDFB17 Redefine RDFB18 RDFB16 Redefine RDFB16 NBK52B Nedbank NBK52B Nedbank NBK53B Nedbank NBK54B GRT31 Growthpoint GRT31 NBK51B Nedbank Group Nedbank NBK51B PMM51 Premium Properties
A- AAA AA+ A- N/R AAA AA+ AA+ AA+ 1- 3 3-5 Years 5-7 Years 7-10 Years 10-20 Years Years Amount Issued (Rbn) Spread at Issue (bps)
January 2019 Issuances Spread Development – By Pricing Tenor and Standardised Rating 1.2 400 395 350 1.0 300 0.8 250 195
Rbn 0.6 172 200 156 26bps 27bps 21bps 150 Spread (bps) Volume 0.4 169 145 135 100 0.2 50
0.0 0 SBS62 SBSA LOM02 Lombard Insurance SBS63 SBSA SBS64 SBSA Banks Non-Bank Financial Institutions Banks Banks AA+ BBB+ AA+ AA+ 5 7 10 NOTE: Notes are senior unsecured unless stated otherwise Spreads are floating (above 3mJ); fixed rates are represented Amount Issued (Rbn) Spread at Issue (bps) Previous clearing spread comparably as swap spreads We show “Spread at Issue” as the most recent clearing spread Source: JSE, Bloomberg, Nedbank CIB and compare this with the previous comparable clearing spread
DCM TRENDS 15 MARCH 2019| PAGE 18 RATING DISTRIBUTION
Issuers’ Standardised Rating Distribution
14 13 12 11 10 9 8 7 6
Number Issuers of 5
4 Calgro is the only issuer in 3 the market that is not 2 rated 1 0 AAA AA+ AA AA- A+ A A- BBB+ BBB BBB- BB- B+ B B- NR Standardised Rating
Source: JSE, Bloomberg, Nedbank CIB
2019YTD Issuances – Standardised Rating Distribution
Credit Rating Issuance Volume (Rbn)
AAA 2.25
AA+ 14.75
A+ 0.25
A- 0.27
BBB+ 0.14
BBB 1.94
N/R 0.02
Total 19.62
Source: JSE, Bloomberg, Nedbank CIB
DCM TRENDS 15 MARCH 2019| PAGE 19 CONTACTS
Analysts
Nthulleng Mphahlele Analyst Tel: +27 11 537 4163 [email protected]
Links to Recent Publications
. Fiscal slippage vs investment pledges, Published 26 October 2018 . SA MTBPS – Moody’s rating implications, Published 25 October 2018 . SA Sovereign Credit Rating – Moody’s, Published 15 October 2018 . SA Sovereign Credit Rating Preview – Moody’s, Published 11 October 2018 . SA Sovereign Credit Rating Action – S&P, Published 29 May 2018 . Eskom Holdings Downgraded – A Story of Waning Implicit Support, Published 29 March 2018 . SA Sovereign Credit Rating Preview – Moody’s, Published 20 March 2018 . Pre-Budget Credit Insight, Published 21 February 2018 . Market Update – Eskom Holdings SOC Ltd, Published 18 January 2018 . Market Update – Steinhoff, Published 16 January 2018
DCM TRENDS 15 MARCH 2019| PAGE 20