South Africa

Equity investors have turned on what was once a darling retail stock in a dramatic two day sell-off which has rocked the company and South Africa to its core.

The shocking fall from grace this week of Steinhoff International, the South African retail group, is causing pain for many in the equity-linked debt market, where it has issued €2.7bn of bonds. The potentially unsound nature of its earnings caused an 80% collapse in its share price this week, and has triggered a fast transfer of its convertibles into specialist hands.

South Africa’s second largest private hospital operator Life Healthcare group has signed a £350m syndicated loan to refinance its acquisition of UK-based Alliance Medical group last year.

Steinhoff International, the global retail conglomerate and one of South Africa’s largest companies, has seen its share price collapse in a historic sell-off, which onlookers say is unprecedented for South African equities.

No deal had appeared from Growthpoint, the Johannesburg listed property company, by lunchtime on Wednesday with two investors telling GlobalCapital that the issuer was struggling to drum up enough demand. The leads later sent out a note to say that the deal had been postponed.

South Africa based Growthpoint is talking a new euro-denominated bond at mid to high 2% yield, following investor meetings last week.

Johannesburg-listed real estate investment trust Growthpoint will next week test whether investor appetite for South African debt has been negatively affected by the series of ratings actions on the country last weekend.

Buying the dip has driven investor activity this week with South African bonds causing them to rally despite S&P downgrading the country, and a strong indication that Moody’s will drop its rating to junk in February.

Investors in South African bonds have bought on the dip because, even as the country’s economic outlook deteriorates, the only way for bonds is up. But positive reinforcement of the country’s poor governance and deteriorating economy reduces the incentive to reform and only postpones what will be a bigger investor stampede for the exit when the time comes.

Growthpoint, the South African listed property investment holding company, has picked banks for its first public deal since 2011. Though deemed an emerging market trade because of the jurisdiction of the issuer, it also appeals to corporate or high grade funds.

After a brief sell-off in response to S&P’s decision to cut South Africa’s foreign and local currency issuer rating last Friday, South African assets rallied on Monday, as investors buy on the dip — even though the country’s economic outlook is on a downward trajectory.

Energy and chemical company Sasol has signed South Africa’s biggest loan deal of the year so far — a $3.9bn revolving credit facility with 17 banks.