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Picture: FINANCIAL MAIL
Picture: FINANCIAL MAIL

State-owned rail firm Transnet has agreed to a five-year loan worth $1.5bn (about R25.4bn) with a group of international lenders led by Deutsche Bank in its biggest funding transaction in seven years.

Poor maintenance, a lack of spare parts for trains, copper cable theft and vandalism have disrupted Transnet’s freight rail services.

It reported a 14% decline in volumes hauled in its last financial year.

In April, Transnet declared force majeure, saying its capacity to provide services to mineral exporters was constrained by a lack of locomotives, large-scale theft of copper cables and vandalism of infrastructure.

Transnet will use the loan to fund its expansion projects and refinance existing debt, it said late on Tuesday.

“This is a significant milestone to stabilise Transnet’s liquidity position in support of our financial sustainability,” said Transnet group CFO Nonkululeko Dlamini.

The first draw-down of $685m (about R1.1bn) is scheduled for later in July, Transnet said.

Africa Finance Corporation, African Export-Import Bank and Bahrain-headquartered Ahli United Bank were involved in the syndicated loan transaction alongside Deutsche Bank.

Last week, Transnet issued a veiled threat to coal exporters that had not agreed to amend transportation contracts after its declaration of force majeure in April. 

Reuters

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