Standard Bank sees $1.2 bln corp bond issues in 4-months

Standard Bank Group expects its clients to issue corporate bonds in excess of 10 billion rand over the next four months and is in talks with four offshore companies interested in inward listings in South Africa.

South Africa, the continent's economic powerhouse, has seen about 13 corporates accessing the market thus far in 2011 to raise some 14 billion rand, according to Megan Mc Donald, Standard Bank's Director of Structured Capital Markets Group.

"We are seeing a very healthy pipeline. We have quite a large number of mandates from corporates. We see it as quite a golden opportunity for corporates in South Africa to access liquidity," Mc Donald told Reuters in an interview.

She has been advising clients to raise capital now while there is still a lot of liquidity in the local market and with healthy investor demand for corporate credit.

Corporate issuance in South Africa's debt capital markets is dominated mainly by banks and state-owned enterprises.

But in future, it will be expensive for banks to finance corporates because of the new Basel III global banking regulations under discussion that will force lenders to hold more capital and liquid assets.

Companies will therefore be inclined to look at alternative forms of funding such as the capital markets, Mc Donald said.

Standard Bank is also in talks with four offshore companies regarding inward listings in the South African market after it arranged Goldman Sachs' 1.25 billion rand issue in September, she said.

South Africa's capital markets are dominated by local investors, which helped keep the market going during the worst of the crisis in 2008/09. Foreign participation there is often in sovereign issues.

During the crisis in 2008-09, South Africa's bond market continued to function albeit at lower levels, but securitisation all but dried up. It started to recover in 2010, and issues doubled in 2011, Mc Donald said.

Standard Bank also sees the impact of Basel III influencing growth of securitisation -- a practice of isolating and pooling assets on a company's balance sheet, transfering them into a special purpose vehicle and selling them off in capital marekts.

Under the present Basel II, banks can fund long-term loans with cheap short-term liquidity but with Basel III they could be required to match financing.

Securitisation is traditionally a means to fund credit and home and car loans but South Africa's outlook for credit extension is quite muted at the moment.

"So we expect to see banks needing to package a lot more of their assets and sell them off into the capital markets. And that is a factor that we believe will drive growth rather than a boom in consumer lending or large extension of credit to consumers," she said.