Bank of China contributes ZAR 1.5 billion to Tranche 1 of R12 billion club loan for Transnet's locomotive fleet acquisition program (Linked to Project ID#70774, #58599)

On November 23, 2015, Transnet SOC Ltd (or “Transnet”), a South African state-owned railway company, signed a syndicated loan agreement worth ZAR 12 billion with five financial institutions, including ZAR 3 billion from the Bank of China for it locomotive fleet acquisition programme (Transnet老旧机车升级计划). The other institutions participating in the club loan were Absa (ZAR 3 billion), Nedbank (ZAR 3 billion), Futuregrowth Asset Managers (ZAR 1.5 billion), and Old Mutual Specialised Finance (ZAR 1.5 billion). All loans for this project were concluded separately with each lender. Each loan reportedly carried a maturity of 15 years and grace period of 4.5 years. According to "Presentation on MNS Report", the Transnet entered into the facility on a floating exchange rate, but shortly thereafter performed a cross-currency interest rate swap on December 4, 2015 that essentially set a fixed interest rate of 11.83%. On December 1, 2015, Transnet drew down a first tranche of ZAR 4.5 billion from the ZAR 12 billion club loan. Bank of China (BOC) contributed ZAR 1.5 billion to the first tranche, which represented half of its total committed contribution of ZAR 3 billion. Project ID#58603 captures BOC’s contribution to the first tranche. Then, on March 1, 2016, Transnet fully drew down the ZAR 7.5 billion second tranche of the ZAR 12 billion club loan. Project ID#70774 captures BOC’s ZAR 1.5 billion contribution to Tranche 2. Transnet was allowed use the proceeds of the first and second loan tranches to finance up to 85% (eighty five percent) of two commercial contracts: a March 17, 2014 commercial contract that it signed with CSR for the acquisition of 459 new dual voltage electric locomotives (“electric locomotives") and a March 17, 2014 commercial contract that it signed with CNR for the acquisition of 232 diesel locomotives. According to CDB, Transnet had procured 591 of these locomotives as of 2016. This project was plagued by controversy and allegations that Transet agreed to overpay CSR and CNR for their equipment in exchange for kickbacks to businesses owned by the wealthy Gupta family. This project is linked to Project ID#58599, which records a $1.5 billion loan that Transnet contracted from China Development Bank in June 2015 for the same project.

Additional details

1. In 2015, CNR and CSR merged to form China Railway Rolling Stock Corporation (CRRC). 2. As this project has both development and commercial elements in funding Transnet and a cross-currency interest rate swap, it is coded as Mixed intent.

Number of official sources

6

Number of total sources

8