Denel selling debt to raise funds


Denel has sold R50 million of its bonds as it seeks to raise cash to pay overhead ahead of an expected government recapitalisation.

According to a statement from the Johannesburg Stock Exchange (JSE), Denel sold R50 million worth of two-year floating rate bond notes on 22 August. They were offered with a high interest rate and are government-guaranteed, making them an attractive proposition to investors, according to Bloomberg.

It is not known who purchased the notes, but it could be the Public Investment Corporation (PIC), which has supported Denel in the past. The PIC owns around 88% of the company’s existing bonds.

Denel has R3.27 billion of outstanding bonds, according to Bloomberg, with nearly R3 billion due this year.

The state-owned defence conglomerate is expecting a R2.8 billion cash injection from the government within the next couple of months, but this will come with conditions including the appointment of a restructuring officer.

Denel is already implementing a turnaround strategy that is aimed to move away from the R1.7 billion loss the company recorded in the last financial year.

Public Enterprises Minister Pravin Gordhan recently told Parliament in a written reply that Denel “is constantly exploring economically viable new revenue streams as part of its profitable growth strategy as well as new technologies to grow its business and technology base”.

He said Denel’s turnaround strategy was approved by the Denel board in February and is “aligned with the expectations of the shareholder [the government]”. This includes disposing of non-core assets and finding an equity partner. For example, Denel is exiting its historically loss-making aerostructures agreement with Airbus.

“Denel continues to and intends to further grow its collaboration with local and international universities and research institutes. Some of the technology and expansion areas being explored include security and cyber technology solutions, system of systems level integration capabilities, advanced software solutions and an enhanced offering to the South African Police Service.”