Denel’s government guarantee extended to 2023

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Denel has confirmed that Government has extended its R2.43 billion guarantee to R3.43 billion until 2023, giving it room to restructure and fix its ‘economic challenges’.

Denel on 29 October said that “the Government guarantee of R2.43 billion has been further extended to R3.43 billion over a five-year period ending in September 2023. The debt portfolio consists of government guaranteed commercial paper totalling R2.864 billion, with an unsecured note of R290 million.”

The company made the announcement in response to queries following the Medium Term Budget Policy Statement on 24 October, when National Treasury said Denel had used R2.8 billion of its R3.4 billion government guarantee.

Last week Treasury cautioned that “Denel will struggle to settle maturing debt on its own because its financial position remains weak. While it implements a turnaround plan, Denel will also contemplate the sale of non-core assets to improve its liquidity position.”

Denel yesterday said “We remain confident that an appropriate resolution within the context of the current economic challenges facing the national fiscus, will be found; and may include selling non-core assets, exiting non-core businesses, divesting from non-viable core businesses and ultimately repositioning our core businesses for long-term commercial sustainability.” Such possibilities are under discussion but subject to Board ratification and applicable PFMA (Public Finance Management Act) provisions.

Denel said it continues to work closely with its shareholder representative, the Department of Public Enterprises and the National Treasury among key state institutions, to find a sustainable funding solution. “The Board continues to support Denel in restoring the confidence of key stakeholders, including financial markets, in the company and the current leadership.”

It added that salaries have been paid in full to all employees for October and the company “will always strive to ensure that such obligations, including paying creditors, are to the best of management’s abilities fulfilled –something that the current liquidity challenge obviously makes difficult.”