The Sasol Inzalo B-BBEE scheme could deliver some value to its investors when it folds next month due to the recent upward movement in the share price of petro-chemicals giant Sasol.
But many investors will see the movement as too little too late to address their fundamental disappointment over the performance of Sasol’s broad based black economic empowerment (B-BBEE) scheme. Some are demanding an inquiry.
Sasol share price has rallied hard over the past few months to touch levels above the R550.00 per share. It was quoted below R400.00 per share twelve months ago and reflects about 40% gain over the past six months. This means that the Sasol Inzalo B-BBEE scheme may be in the money when it unwinds.
It essentially means that the total value of Sasol shares held by the B-BBEE scheme may be able to extinguish the schemes debt and even leave a surplus that can be distributed to shareholders. Sasol Inzalo shareholders have for a long time leaved under the fear that a depressed Sasol Inzalo share price will leave the scheme with a deficit, money owed to funders and nothing for investors. The recent rally in the Sasol share price is taking care of those fears. It’s raised hope that there will be some money left forSasol Inzalo investors to share.
Sasol itself expressed this hope in its 2017/18 financial results. “Based on current share price and forecast debt balances, there could be residual value, after settlement of third party debt, which would be distributed to Sasol Inzalo participants.”
The share price rally had already worked some magic into the Sasol Inzalo Groups chapter of the transaction. Sasol announced that it has “settled the Sasol Inzalo Groups debt of approximately R4,6 billion in June 2018 by utilising existing cash to repurchase up to 9,5 million preferred ordinary shares from Sasol Inzalo Groups Funding…”
This did leave a shortfall of R59 million. Sasol said it “funded the residual shortfall on the third party debt of R59 million.”
Sasol added that “The Sasol Inzalo Public debt becomes due in September 2018. The Sasol Limited Board has approved that Sasol settle the Sasol Inzalo Public debt in the same manner as Sasol Inzalo Groups so as to limit dilution on our shareholders, while maintaining investment grade ratings by utilising existing cash or credit facilities to repurchase up to 16,1 million preferred ordinary shares from Sasol Inzalo Public Funding.”