South African Transnet signs $1.5 billion loan with international banks

South Africa’s state-owned railway company Transnet has agreed a five-year loan worth $1.5 billion with a group of international lenders led by Deutsche Bank AG in its largest financing deal in seven years .

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

It reported a 14% drop in volumes transported during its last financial year.

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

Transnet will use the loan to fund its expansion plans and refinance existing debt, it said in a statement late Tuesday.

“This is an important step to stabilize Transnet’s liquidity position to support our financial viability,” said Nonkululeko Dlamini, Chief Financial Officer of Transnet Group.

The first drawdown of $685 million is scheduled for this month, 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 change transportation contracts, following its declaration of force majeure in April.

(Reporting by Nelson Banya; Editing by Helen Reid and Jason Neely)

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