South Africa

Banks are signing documents for the $4bn of acquisition loans for South African-based Steinhoff on Wednesday. The deal has gone “better than expected,” according to one lead banker.

South Africa was thrown into financial uncertainty this week as its finance minister, Pravin Gordhan, became embroiled in a corruption probe by the country’s elite police unit, the Hawks. Volatility hit local currency bonds, which remain some 50bp wider, but the country’s sovereign curve is already recovering and in equities and loans it is business as usual. But some say this underplays the risk of investing in South African assets.

The sun continued to shine on South African equity capital markets this week, despite growing political volatility.

The $1bn loan for telecoms firm MTN needed an accordion feature to get it to target size, even though the loan market has so far shrugged off the volatility surrounding allegations against the country’s finance minister.

South African president Jacob Zuma has spoken out in support of the country's troubled finance minister, Pravin Gordhan, but this did little to reassure the market as volatility in local currency bonds and the rand extended into Thursday.

The loan for South Africa’s MTN, which is partly underwritten by BAML and Citi, may have to include an accordion feature to hit its $1bn target size, said a banker on the deal.

PPC, the largest listed cement producer in South Africa, has set terms for its R4bn ($280m) rights issue after the deal was almost unanimously approved by shareholders at the start of August.

SPAR BBBEE Retailer Employee Trust and the SPAR BBBEE Employee Trust, have sold 3.8% of Spar Group, the South African supermarket chain, for R1.5bn ($108m) via an accelerated bookbuild that unwound a black economic empowerment scheme set up in 2009.

The $4bn of loans for Steinhoff’s acquisition of Mattress Firm are in syndication and due to be signed next week, according to a banker involved in the deal.

South Africa’s dollar debt had dropped up to two cash points on Wednesday after reports that the country’s finance minister could be charged with an offence rocked the market. While investors are concerned, the relentless bid for EM assets contained the sell-off, an EM banker said.

Activity in equity capital markets looks to be growing after a summer lull. Several large transactions have either been announced or completed in Europe and Africa.

Activity is ramping up in emerging markets with several mandates coming through this week. While the unrelenting buying of the asset class continues, idiosyncratic risks are a reminder of the volatility that can arise.