Sasol has introduced that its US financing subsidiary has began the method to challenge dollar-denominated bonds to the worth of $740 million (shut to R14 billion). The proceeds will largely be used to repay present debt amenities falling due inside a number of weeks.
The offer of convertible bonds follows the difficulty of R15 billion price of rand-denominated bonds a number of weeks in the past, which was additionally undertaken to repay due debt.
Sasol Financing USA LLC will challenge the brand new senior unsecured convertible bonds, assured by Sasol Limited. The new five-year bonds will mature in November 2027.
Debt
According to its newest annual report, Sasol had debt of some R16.4 billion on the finish of its monetary yr at finish June 2022. The rand quantity of this dollar debt that falls due on the finish of November might be a lot increased now due to the decline in the rand from R16.50 per dollar on the finish of June to the present R18.20.
That Sasol is elevating lower than the quantity it clearly wants to change the maturing debt reveals that issues are going properly on the worldwide power and chemical group.
Management notes in the announcement of the brand new bond offer that the web proceeds will probably be used for extra than simply rescheduling present debt. “The offering [is] expected to be used for general corporate purposes, including, but not limited to, the refinancing of debt,” it says.
The new convertible bonds will probably be supplied to qualifying buyers and will probably be issued on or round 8 November 2022.
Interest charge
Sasol estimated, in its preliminary announcement on Tuesday, that the bonds are anticipated to pay a coupon of between 4% and 4.5% each year. It introduced later in the day that the pricing was ultimately mounted at 4.5%.
The R16.4 billion that’s repayable now additionally had a set rate of interest of 4.5%.
While the rate of interest is nearly the identical, it nonetheless reveals an enchancment if one considers that rates of interest have elevated sharply. For occasion, the Secured Overnight Financing Rate (SOFR) for dollar-denominated debt elevated from shut to zero % in the beginning of 2022 to the present 3.05%.
The diploma to which Sasol’s monetary standing has improved in the eyes of buyers will be seen in the truth that it’s nonetheless paying SOFR plus 2% on some R23 billion of debt that’s due in June 2024.
It can be paying mounted charges of between 4.4% and 6.5% on dollar debt price R62 billion that’s due between 2024 and 2031.
The newest monetary statements present that Sasol had R104 billion in long-term debt on the finish of June 2022, with R22 billion of this repayable inside 12 months of the date of the steadiness sheet.
The debt was largely unchanged from a yr in the past, however money balances improved as revenue elevated from R10.5 billion in the 2021 monetary yr to R41.7 billion in the final yr. Cash circulation from working actions improved from R34.5 billion to practically R41.2 billion.
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Sasol had money of practically R43 billion on the finish of June 2022, in contrast to R30 billion on the finish of the 2021 monetary yr.
Conversion charge
The group based mostly the conversion ratio of the convertible bonds on its share worth on Tuesday, 1 November, utilizing a weighted common worth of the day’s buying and selling, plus a big premium of 30% to the calculated worth.
It revealed a separate Sens announcement after the shut of the JSE on Tuesday to say that it’s going to convert the bonds into Sasol shares at a worth of roughly $20.38 per share after they mature in 5 years’ time. This compares to the day’s closing worth of $15.62 per share (R285 at an trade charge of R18.24 per dollar).
This represents one thing of an out-out-of-the-money place for buyers, however it’s seemingly that Sasol’s share worth will probably be increased than the ‘strike price’ given Sasol’s outlook.
Only time will inform if the bond holders will profit in addition to the 4.5% annual curiosity funds.
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“The convertible bonds will be issued at 100% of their principal amount in minimum denominations of $200,000 each and, unless previously redeemed, converted or purchased and cancelled, each will be redeemed at their principal amount on or around 8 November 2027,” in accordance to the announcement.
“The convertible bonds can pay a coupon of 4.5% each year, payable semi-annually in arrears and in equal instalments on 8 May and eight November of every yr, with the primary curiosity cost date on 8 May 2023.
“The initial conversion price is $20.3863, representing a premium of 30% to the volume weighted average price of the ordinary Shares listed on the main board of the JSE between opening of trading and pricing today, 1 November 2022, translated into US dollar using the exchange rate at the time of pricing.”
It provides that the conversion worth will probably be topic to normal market anti-dilution changes pursuant to the situations, together with occasions reminiscent of dividends.
However, Sasol additionally has an possibility to redeem the convertible bonds at their principal quantity (plus accrued however unpaid curiosity) in accordance with the situations at any time on or after 29 November 2025, if the parity worth equals or exceeds $260 000 for a specified time frame, or if, at any time, 85% or extra of the principal quantity of the convertible bonds initially issued has been transformed and/or redeemed and/or bought and cancelled.
Sasol will apply for a list of the bonds on the Open Market (Freiverkehr) section of the Frankfurt Stock Exchange inside 30 days following the time limit of the offer.
Listen to this MoneywebNOW podcast with Simon Brown about whether or not a latest Sasol replace means there is a chance for buyers:
