Sibanye-Stillwater has plan to cut debt by a third, and it is not a rights offer – by Allan Seccombe (Business Day – June 7, 2018)

Analysts pointed out that streaming was often a sign of a company in trouble

Debt-laden Sibanye-Stillwater will put in place a structure to generate cash within the next eight weeks, to address investors’ concern about its debt and a potential rights issue that has halved the company’s share price so far this year.

Sibanye’s net debt stands at about R23bn and analysts have flagged concern about the ratio of net debt to adjusted earnings before interest, tax, depreciation and amortisation (ebitda), which was 2.4 times at the end of March.

That is below the covenant requirement of less than 3.5 times for the remainder of this year and 2.5 times thereafter.

Addressing this concern directly, Sibanye CEO Neal Froneman said the company would put in place a streaming deal in the US, raising $500m, and potentially another structure worth $100m around the inventory held at its recycling business in the US.

That $600m is worth R7.64bn at the prevailing exchange rate, and so amounts to about one-third of the company’s R23bn net debt. The dramatic change in Sibanye’s debt level came from the $2.2bn cash purchase of the entire Stillwater palladium and platinum mining company.

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