Sasol plunges after saying it needs to settle R12bn in debt
Sasol tumbled the most in 15 months on Wednesday, after the biggest producer of fuel from coal said it may sell about R13bn worth of shares to meet its obligation to repay debt owed by black investors.
The decline in the company’s stock since the mid-2014 slump in crude prices precludes payouts to more than 250,000 black South Africans who participated in the Inzalo transaction in 2008, and forces Sasol to settle about R12bn it owes. An equity issuance is the best financing solution, CEO Bongani Nqwababa said.
Sasol fell as much as 7.6%, the biggest intraday decline since June 2016, and was trading down 6.7% at R371.75 at 3.47pm.
The potential bookbuild is "the biggest driver right now", Wade Napier, an analyst at Avior Capital Markets, said by phone.
When Inzalo unwinds in 2018, those investors will have the option to participate in Sasol’s next leg of empowerment, Khanyisa, which aims to take black ownership of its South African unit to 25%.
The plan to purchase and then cancel the Inzalo shares, plus any associated costs, will require about R13bn, chief financial officer Paul Victor said. Sasol would consider alternatives if they become more attractive than a bookbuild, the company said.
Sasol will hold a shareholder meeting in November for investors to approve the proposals for unwinding Inzalo, selling shares and creating the Khanyisa structure, which will include an element of employee ownership.
Sasol will provide "notional and other vendor funding" for Khanyisa, it said. When Inzalo was set up, some of the funding came from third parties.