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2010-04-13: City of Joburg bond successfully redeemed
 
The City of Johannesburg has successfully redeemed its inaugural municipal bond with principal payments made to investors today, 13 April 2010 to the value of R1billion.

Member of the Mayoral Committee for Finance Councillor Parks Tau says, "We have settled our investors and this is an excellent indication that the City is very capable of handling its finances".

The COJ01 Bond of R1billion was launched as a six-year bullet bond with semi-annual interest payments and the principal payment on 13 April 2010. It was well received by the market then attracting 10 new institutional investors. 
"Johannesburg has set a precedent amongst municipalities being the first to issue and redeem a bond of this magnitude" says Tau.

According to Tau the City is committed to building a benchmark curve and credibility in capital markets, and as such the Domestic Medium Term Programme (DMTN) has been increased by an additional R7 billion to R13 billion.
In August 2009, Joburg was again the first municipality to raise short-term funding in the commercial paper market.  It issued three commercial papers with six month maturity and total nominal amount of R1.6 billion and according to Tau "has since successfully redeemed R1 billion with the balance of R600 million to be redeemed on 22 April 2010".  

"The City of Johannesburg takes this opportunity to thank all its investors for the continuous support and confidence placed in the organization" says Tau.

In 2006 the City also established a Sinking Fund that is externally managed to ensure timeous and successful redemption of all listed bonds.  The COJ01 bond was successfully redeemed by funds set aside over the years through the Sinking Fund.

The City first considered the idea of initiating the municipal bond market in South Africa in 2001. In 2003 City officials undertook a study tour to Mexico to learn international best practice in the municipal bond market.

To date the City has issued six long-term bonds with a nominal outstanding amount of R7, 8 billion.  The City has benefited tremendously by issuing bonds through: access to a wider investor base, minimizing asset - liability gap, reducing the cost of funding, financial discipline and diversifying the funding source.

Ends 

Issued on behalf of Councillor Parks Tau
Member of the Mayoral Committee for Finance

By 

Virgil James
Spokesperson 
City of Joburg
082 467 9415
011 407 7226