Sibanye-Stillwater eases pressure with new debt covenants

SIBANYE-Stillwater has won some breathing space for its under pressure balance sheet after agreeing with lenders to raise thresholds over R6.5bn in company debt.

The covenants – which if broken allow lenders to call in their loans – will be changed such that Sibanye-Stillwater can register a net debt of up to 3.5 times its adjusted earnings before interest, tax, depreciation and amortisation (Ebitda). This compares to the current covenant with lenders that the company will not exceed net debt of more than 2.5x its adjusted Ebitda.

The new covenants are for 30 June to 30 June 2025 inclusive. Thereafter the covenant changes to net debt of 3x adjusted Ebitda for 31 July 2025 to 31 December 2025 inclusive.

The uplifted covenants were agreed with 11 international banks and four South African banks for a $1bn revolving credit facility and R5.5bn RCF.

Other covenant criteria have also been relaxed. Interest cover has been amended in line with the leverage covenant. The $1bn RCF has been amended to include a letter of credit facility and an ancillary facility. This is to improve flexibility and application of the debt, Sibanye-Stillwater said on Friday.

Sibanye-Stillwater CEO Neal Froneman said the uplift in the covenants ought to provide the market “with increased confidence in the outlook of the group”. Sibanye-Stillwater’s current debt leverage is “well below” the existing 2.5x covenant limit, he said. The group closed its financial year to end-December with net debt of R11.9bn.

Prolonged downturn?

The two-year period agreed with lenders for the uplifted covenants provides insight into Sibanye-Stillwater’s downside outlook for platinum group metals (PGMs). A heavy slide in prices last year – palladium was down 40% – resulted in Sibanye-Stillwater reporting a basic earnings loss of R37.7bn (2022: R18.4bn). In February it announced $2.58bn in impairments which fuelled the year-end loss.

Froneman unveiled R6.6bn in costs had been cut and unveiled more reductions in staffing this year. Nonetheless, first quarter adjusted Ebitda fell 72% to R2.1bn ($113m).

Froneman is expected to announce additional measures to each pressure on the balance sheet including the upfront sale of metal by-credits with a royalty or streaming company. “We have previously stated our intentions to uplift our debt covenants along with pre-emptively evaluating various non-debt capital instruments such as pre-pays and streams,” he said today.

These measures would be taken in order to “secure the integrity of our balance sheet through the commodity price cycle, if required”.