State arsenal Denel is to resubmit an application to Treasury for a R1.7 billion recapitalisation it expected in April this year.
The funding which it needs to ensure its long turn sustainability forms part of a R5.2 billion rescue package approved by Cabinet in 2006.
Denel has so far received R3.5 billion.
Business Day reports Denel is carrying a debt-to-equity ratio of 1:3 and relies on government guarantees of R1.85 billion to sustain its borrowings.
Its latest annual report, tabled in Parliament yesterday, said these guarantees will be sufficient to address liquidity concerns in the current financial year, but that recapitalisation is needed over the longer term to keep the group solvent.
Failure to recapitalise the company will see it reliant on loans that incur crippling interest payments and will eventually lead to its closure, which would cost the state –and taxpayers – at least R18 billion.
For the year-to-March borrowings amounted to a staggering R872 million, a dramatic increase over the R149 million loaned for the year to March 2008.
Interest paid in the 2008/9 financial year amounted to R86 million, the annual report added.
The recapitalisation is part of a Cabinet-approved turnaround strategy that has so far succeeded in reducing losses from R1.6 billion in 2005 to R544 million last year on a turnover of R3.9 billion.
Pic: Denel logo