Sasol prepares SA’s biggest rights issue in decades

South Africa‘s Sasol aims to generate R99 billion ($6 billion) by the end of the 2021 financial year through several measures, including a potential rights issue and asset sale, as the company looks to address debt levels after a crash in the price of oil.

Read: Sasol caught between the devil and the deep blue sea

South Africa has another debt crisis: Sasol races to raise cash

Shares in the petrochemicals group rose 15% at the market open before reversing some gains to trade up 6.28% at R47.55 by 0716 GMT.

Sasol saw its shares plunge last week, falling to a 21-year low after oil prices dived, raising concerns about its debt levels following delays and cost overruns at its Lake Charles Chemicals project (LCCP) in Louisiana.

“The immediate focus is on the actions to stabilise the company and protect the balance sheet so that the underlying value of the portfolio is not compromised, and instead the potential realised in the interests of all Sasol’s stakeholders,” Sasol said.

The world’s top manufacturer of motor fuel from coal said it would target immediate measures to deliver a cash improvement of approximately $1 billion by June 30, 2020.

Sasol said it could raise up to $2 billion in a potential rights issue after the 2020 financial year results.

The company had already entered into a standby underwriting agreement with BofA Securities, Citigroup and JP Morgan Securities for a rights issue.

Sasol, which has completed a review of its assets started in 2017, said it would accelerate disposals and expand the scope to realise proceeds above its previous target of $2 billion.

The company said it would also seek a potential partner at Sasol’s US Base Chemicals assets.

Sasol said it was engaging its lenders under its debt facilities to discuss adequate flexibility on its financial maintenance covenant thresholds in its debt agreements.