SIBANYE-Stillwater is to issue approximately 248 million shares settling the balance of a $450m bond which it used to help part finance the group’s $2.2bn acquisition of Stillwater Mining, a palladium miner, in 2016.
Some $354m in debt was settled in closing out the bond which had been due to mature during 2022.
Net debt to earnings before interest, tax, deprecation and amortisation (EBITDA) could be reduced to 0.22x if the bond was settled, the company said in August at its interim results presentation. Net debt to EBITDA was 0.55x as of June 30.
The proposed settlement of the bond represents a major turnaround in the health of the firm’s balance sheet given that the company once neared breaching the 2.5x net debt to EBITDA covenants set by bankers.
“The redemption of the bonds will further improve the leverage and capital structure of the group,” said Sibanye-Stillwater in a statement. “Furthermore, the redemption of the bonds eliminates interest costs and related income statement revaluation costs and volatility, materially reducing financing costs and outstanding debt,” it said.
Sibanye-Stillwater previously announced an interim payout of 15% of EBITDA, slightly lower than the planned long-term dividend policy, in recognition of the uncertain economics of the Covid-19 pandemic.
Neal Froneman, the firm’s CEO, said that dividends could only be expected to increase. “If we cannot create more value, then we will return it and we would exceed our dividend policy,” he said. “I suggest we will see a significant re-rating. We are rated well below our peer group and we know why we are there,” he said.