TAPPING shareholders for funds via a rights issue might be “a tough ask” for Sasol’s shareholders, said Bloomberg News citing an analyst.
Commenting on the likely scenarios for the debt-laden petrochemicals company, Abdul Davids, a fund manager at Kagiso Asset Management, told the newswire: “A distressed rights issue amid current market conditions will be a hard sell to Sasol shareholders.
“Based on current oil prices and existing covenant restrictions, a capital raise in the order of R80bn might be required”.
Sasol CEO, Fleetwood Grobler, said on March 12 the company was sufficiently capitalised, and that it would generate free cash even in the current low oil price scenario. Nonetheless, the company would examine short-range liquidity options, he said.
Numbering options it was prioritising, that also included a business optimisation process in order to lower costs, and efforts to improve its working capital profile, Sasol was “… assessing alternatives to manage Sasol’s near-term debt covenants constraints, including a potential equity issue”.
Grobler also said the company would expand the ambit of its non-core asset disposal strategy in order to realise proceeds in excess of the current $2bn target.
“Liquidity isn’t a problem at this stage,” Alex Comer, an analyst at JPMorgan, said in a note cited by Bloomberg News. “Its looks OK for at least another year, even assuming $35 dollars a barrel of oil, providing the banks don’t call in the debt on a covenant breach.”