Africa’s Biggest Money Manager Shakes Out Its Purse for Denel

JOHANNESBURG (Capital Markets in Africa) – For South Africa’s cash-strapped weapons company Denel SOC Ltd., there’s one fish that keeps on biting whenever it casts its net into debt markets, and that’s the Public Investment Corp.

Earlier this month, the state-owned arms maker issued 290 million rand ($20 million) of government-guaranteed, senior unsecured notes maturing a year from now. The PIC, which manages most of the South African government’s pension-fund money, bought all of that new debt, even after Denel reported a 1.7 billion-rand operating loss for 2018. Reuters was first to report that the PIC had purchased the whole issue.

This isn’t the first time the PIC has backed Denel.

Data compiled by Bloomberg show that the PIC holds all of Denel’s 1.46 billion rand of debt maturing in September. In total, Africa’s biggest money manager owns 2.8 billion of the 3.2 billion rand of securities the weapons company has issued.

The PIC, which has about 2 trillion rand under management, said earlier this month it would only buy debt from state-owned companies if it was in its clients’ interests and in line with its mandate.

The pension-fund cash that the PIC manages is guaranteed by the government and in the case of lower-than-projected investment returns, taxpayers’ money would have to fund the shortfall.

Source: Bloomberg Business News