Market welcomes Sibanye’s $400m bond buyback

Sibanye-Stillwater, whose high debt levels has raised eyebrows in the market, said on Tuesday it intended to retire 31% of its long-term debt through $400m of bond repurchases.

The tender process would be funded through existing cash resources, including the proceeds of a financing recently concluded with Wheaton Precious Metals, Sibanye CEO Neal Froneman said.

Up to $350m worth of the tender offer applies to 6.125% bonds due on June 27 2022, and $50m to 1.875% convertible bonds due on September 26 2023.

“The repurchase of these instruments creates immediate value and will meaningfully reduce

annual finance expenses and repayment obligations associated with our debt, consistent with delivery against our strategic goals,” Froneman said.

The company estimated the move would reduce annual interest costs by approximately R378m per year, assuming an exchange rate of R14.70/$.

Sibanye’s aggressive growth strategy, notably its foray into platinum group metals, has increased the company’s leverage. Its intended acquisition of Lonmin, the world’s third-largest platinum producer, had come with assurances the deal would not increase the group’s overall debt.

In the six months to June, the company had reported net debt had grown to R25bn from R22bn a year earlier. Those results saw a finance expense of R1.4bn, which was flat from the matching period a year earlier.

Cash on the balance sheet fell to R2.1bn from R6.5bn.

At 10.45am Sibanye’s share price had risen 4.17% to R9.25, compared to the gold indexes 0.94% rise. Sibanye has lost 41.53% so far in 2018 compared to a 22.32% fall in the index, amid softening precious metal prices.