Sasol to consider rights issue, asset disposals as oil crash speeds investor flight
JOHANNESBURG (Reuters) - South African petrochemicals group Sasol said it would consider raising funds by selling additional shares and disposing of more assets amid growing investor concerns about its debt levels after a crash in the price of oil. Around 76.5 billion Rand ($4.6 billion) has been wiped off the company's market value this week, with Sasol's shares hitting a 21-year low on Thursday, falling as much as 42% as oil prices plunged before recovering slightly to end the day down 29.36% at 37.24 rand.
Barring a significant recovery, this will be Sasol's worst week since listing in September 1989. The unexpected fall in oil prices has rattled investors who were already concerned about the company's high debt after it renegotiated some debt covenants last November. Reacting to the frantic selling, Sasol said it would consider a potential equity issue, reduce costs, reschedule some capital expenditure, expand asset disposals in excess of the current $2 billion target and engage lending groups. The company said cash and available facilities stood at around $2.5 billion rand with no significant debt maturities before May 2021. It has just completed a review of its assets in a bid to reduce debt. Seeking to assuage investors' fears the company could break its debt covenants, it said that at the current oil price of approximately R580/bbl, it would be within current covenant levels at 30 June 2020. Sasol's newly appointed chief executive officer Fleetwood Grobler said it was critical the company acted quickly and decisively. "We are therefore working towards a package of measures to ensure that the business is profitable even at low oil prices and that we continue to have a strong balance sheet to support it," said Grobler.
ANOTHER HEADACHE FOR SOUTH AFRICA Monday's crude price crash further hobbled a company already battling to restore shareholder confidence after delays and cost over-runs at its Lake Charles Chemicals project (LCCP) in Louisiana forced its joint chief executives to resign late last year. "With the oil price collapsing, it's eroded the margin they were expecting on the project," said an investor who sold his Sasol shares on Monday. The destruction of value at one of South Africa's biggest companies adds to headaches for a government already grappling with a heavily-indebted state power company and airline. Although not a state-run company, Sasol's two top shareholders are state agencies - State asset manager the Public Investment Corporation has a 15.05% stake, while local development finance institution Industrial Development Corporation holds 8.53%, according to Refinitiv Eikon. Sasol said it would update the market in a conference call on Tuesday.
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