Kagiso Tiso Holdings innovates to raise BEE capital

Kagiso Tiso Holdings (KTH) is continuing its trail blazing role in the black economic empowerment (BEE) investment groups space, this time around through a well-executed capital raising exercise in the bond market.

KTH announced that, through a wholly-owned subsidiary, Kagiso Sizanani Capital (KSC), using its Domestic Medium Term Note (DMTN) programme with the JSE, it raised an additional R600million senior unsecured note from a range of local investors. This was achieved through a book build process. KSC now has capacity to issue instruments to a maximum of R2 billion.

This is a remarkable development in the BEE investment groups space as opening up a newish channel for raising capital. It can be described as a less cumbersome path if you can walk it. It does require superior organisation from BEE investment groups. Traditionally BEE groups raise capital through more disruptive including listing on the JSE which is highly a highly intricate and long path, selling equity and from banks who seem to have lost appetite.

KTH is an advanced BEE investment holding entity with roots extending back to the very first wave of South Africa’s economic distribution poser. The group sprung out of community development entity Kagiso Trust which established a BBBEE styled investment entity back in 1993 under the direction of antiapartheid activist Eric Molobi. Kagiso Trust Investments (KTI) developed to be one of the most prominent players in the BEE equity space walking away with some of the biggest BEE deals. KTI merged with another BEE investment player, Tiso Group last year to form what is probably the largest group of its kind KTH. Tiso had also grown into a prominent BEE player under the direction of Fani Titi, Nonkululeko Sowazi and David Amadomako.

The KTH statement said the DMTN programme allows KSC to issue a range of instruments including both bonds and preference shares, making it unique in the South African market. Issuances under the programme are guaranteed by KTH. Moody’s rating agency has rated KTH as Baa2.za.

The funds will be utilised to refinance existing debt and for future acquisitions. The JSE granted approval for the listing of the not , KSB008, from 1 November 2012.

Vuyisa Nkonyeni, CEO of KTH said “The DMTN programme represents an innovative way for investment companies such as KTH to access capital markets. It highlights KTH’s management capabilities and our vision of building value enhancing black owned and managed investment platforms. The support from investors signals an endorsement of the KTH business model and its stature in the South African Market”.

Frencel Gillion, CFO of KTH says “The new debt issue allows us to streamline the KTH Capital structure and enhances the KTH liquidity position. KTH remains conservatively geared and well capitalized to take advantage of future investment opportunities.”

Andrew Costa, Head Standard Bank Debt Capital Markets said “Standard Bank acted as a sole lead manager to the bond issue. Standard Bank was delighted to partner with KTH and help to uccessfully issue their debut public bond.”

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