Braving the turbulent market, national road network operator the South African National Roads Agency (Sanral) plans to bring three new bonds to the market on Thursday in a bid to raise funds for erecting toll roads in Gauteng.

CEO Nazir Alli said last week the bond issue — the first tranche of a broader plan to raise a total of R10bn over the next 10 months or so — sought to raise R2bn.

“We will come to the market every two to three months.”

Alli admitted he was concerned about the gloomy state of the market. “We are quietly optimistic that the market will stabilise soon.”

Mark le Roux, head of fixed income at Coronation, said the agency was likely to elicit investor interest because the bond market was not as turbulent as the equity market.

“Under normal circumstances, they should be able to place the paper. But it all depends on the price.”

The bonds — which yield 12,25% and mature in 2018, 2022 and 2028 — would be priced at 225, 210 and 205 basis points respectively above the government debt of similar maturity. Generally, the bond market is sensitive to rising interest rates, which have reached 15,5%, and this tends to stoke up yields resulting in increased borrowing costs.

Moody’s has assigned the bonds “Aa2.za” ratings. The global ratings agency says the ratings reflect confidence in government-related issuers.

“The high probability of support reflected the Sanral’s status, which implicitly guaranteed ultimate support of the central government,” Moody’s said.

“Sanral performs its mission — a critical component of the government’s social and economic policy — on behalf of the central government.

“In contrast to the situation with other state-owned South African companies, there is no risk of migration towards a corporate type of structure,” Moody’s said .

But it has added a cautionary note, saying that the expansion strategy involving new toll roads increased business risk.

It also noted that a substantial increase of leverage was planned with new debt without explicit guarantees.

The capital raised from the planned new bonds would fund a toll-road portion of the Gauteng Freeway Improvement Project, which aimed to upgrade roads in the province.

The construction includes about 73km of new freeway sections, including portions of the PWV 5 (between Kyalami and Tembisa), PWV 9 (between Johannesburg and Pretoria), PWV 14 (between Johannesburg and OR Tambo International Airport), as well as the N17 between the West Rand and Soweto.

Road improvements extend to interchanges, crossroads, installation of electronic toll collection systems, and the installation of an intelligent transport system.

The government intended to spend R25bn over five years on road facelifts, mainly in Gauteng.

The lead arrangers for the bonds were Vukani, Absa and RMB.