Radio Interview - Sasol reconsiders settling of old Inzalo debt
Moneyweb / 9 October 2017 19:05 / Nastassia Arendse
Bright Khumalo of Vestact says Sasol is hinting that debt is probably not an option in view of preserving its credit rating status.
NASTASSIA ARENDSE: We were talking with our market watcher about Sasol’s plan to abandon the initial plan they had earlier to sell about R13 billion of shares to meet its obligation to repay debt owed by a black investor group. For more I’m joined on the line by Bright Khumalo from Vestact. Bright, thanks so much for your time.
BRIGHT KHUMALO: It’s lovely to be here. Thank you.
NASTASSIA ARENDSE: Earlier on, when the announcement came out, I saw a lot of tweets come through and the one said, “What were they thinking?” Let’s take it back a little here. What was the rationale before, when they decided they were going to sell shares? Take us through why this was a bad idea.
BRIGHT KHUMALO: I’m not criticising anyone, saying it was a bad idea. It would get me into trouble here. Basically when they said on September 20 that they were going to sell some shares, the top shareholders – probably three, four shareholders, the PIC, the Government Employees Pension Fund and Allan Gray, which together own about 40% – were not happy by the fact that they might be diluted about 4% by this new issue of 43 million Sasol shares, which account for R2-3 billion. That’s obviously the shortfall that came about, the difference in the initial Inzalo structure, which wasn’t fully paid off in terms of debt.
NASTASSIA ARENDSE: They say they are going to be considering other options. What other options are there for them from your perspective at this point?
BRIGHT KHUMALO: On top of saying they are exploring other options, they did emphasise the fact that they want to keep their investment-grade credit rating status, meaning they are also hinting that debt is not [what] they’d be looking at. So I’m really interested to find out what they are going to do from here, because it’s very confusing. I’m not going to say it’s easy. They are probably going to raise debt, but if they don’t want to compromise their credit rating it kind of makes you wonder, as a shareholder, what they are going to do, what they are planning. They are still obviously trying to assess their different options, but they are not telling us what those are at the moment.
NASTASSIA ARENDSE: You are like my BEE expert, and I remember earlier today we had a question through the Moneyweb site where somebody said he is 60 years old right now, and is concerned that he might not live until 2028, when the next scheme unwinds. He wants to know what happens at that point. So I figured I’d ask Bright Khumalo – he might know what happens if the gentleman says he is concerned he’s not going to live long enough?
BRIGHT KHUMALO: Well, if you look at the actuarial assumption of how long people live, he has still an 80% chance of living till 90 years old. So he shouldn’t be worried about that. He is still a spring chicken.
But with regard to the new scheme now, the Khanyisa scheme, there will be, I’m sure, a lockup period – they haven’t announced it – if you convert from Inzalo to Khanyisa. But that period is probably going to be three to four years, five years max. Then after that the person can trade those shares on the market to other black shareholders, because the scheme is going to be perpetual, meaning that Khanyisa can be traded among black people, which is also good for Sasol. It means a live BEE deal they’ll be doing in the market, and this one is perpetual, so there is no argument about once empowered, always empowered, whatever. You know at any given time black shareholders will own 25% of the local business, Sasol.
NASTASSIA ARENDSE: Alright, Bright, thanks so much for your time.
LINK - https://www.moneyweb.co.za/moneyweb-radio/sasol-reconsiders-settling-of-old-inzalo-debt/