OWN CORRESPONDENT, Johannesburg | Monday 5.00pm.
FINANCIAL groups Genbel Securities (Gensec) and Real Africa Durolink Holdings (RAD) have linked up with with Stuart Rees, founder of the South African Futures Exchange (Safex), to set up a corporate debt market in South Africa.
Gensec and RAD noted the lack of a formal market in corporate and institutional debt in South Africa, and said the new venture will fill this gap. The new insitution, called Kiwane, will acquire previously illiquid corporate debt.
The lack of a strong secondary market for corporate bond issues has been noted by economists as a hampering factor on corporate fundraising through debt issues.
Announcing the initiative, Stuart Rees, former CEO of Safex, said that the new company will take the form of a collateralised debt obligation (CDO) fund. Kiwane will acquire investment grade corporate debt, issued by South Africa’s leading corporations and other prime institutions.
It will repackage the debt as Kiwane bonds, which will then be issued into the market.
Gensec officials added that the firm will make a market in the newly issued Kiwane bonds, which will be rated by Fitch IBCA international rating agency. One big market maker and the large size of the intended issue will provide much-needed liquidity to the corporate bond market.
The bond fund will be open-ended, according to Rees, and the initial issue of R500-million in Kiwane bonds will be privately placed to “selected investors.” The Kiwane paper will be listed on the Bond Exchange and will be held in the central scrip depository.