business review

Sasol Financing (Proprietary) Limited

Profile    Sasol Financing operates as in-house bank and centralised treasury for the Sasol Group. The company is responsible for Group cash and liquidity management, in-house banking, domestic and international financing arrangements, foreign exchange management, treasury risk management and other general treasury matters. The company is funded by own reserves, loans from Sasol Limited and internal and external borrowings.

Business review  In a year of significant growth in the Sasol Group, Sasol Financing fulfilled its objectives and mandate successfully and helped to bring to fruition many vital solutions needed to fund the Group’s global expansion ambitions.

The acquisition of Sasol Chemie (formerly Condea) increased the Group’s funding requirements significantly. External debt increased from R1 501 million on 25 June 2000 to R8 449 million on 25 June 2001. Sasol Financing arranged a combination of local capital market funding, offshore revolving credit facilities, a local commercial paper issue, normal bank credit facilities and asset-based financing to fund Group requirements.

Stringent treasury risk management measures are in place. The treasury operations committee and the Sasol Financing board of directors, which meets quarterly, govern all treasury activities.

DMTN programme raises R900 million  Sasol Financing issued a R900 million senior three-year bond on 30 June 2000, which is due on 30 June 2003. The Sasol Financing bond (SFL1) was the first issue from Sasol Financing’s domestic medium term-note (DMTN) programmes and is also one of the first bonds issued in the South African market from DMTN programmes. The total DMTN programme size is R2 billion.

The SFL1 was placed with a wide range of domestic institutional investors and was oversubscribed more than three times. The SFL1 was launched at a spread of 85 basis points above the equivalent Government funding rate. Secondary market activity has since driven this margin down to 56 basis points at year end.

Offshore revolving credit facility established  A syndicated dual-tranche revolving credit facility of US$400 million, at market related prices, was concluded on 9 November 2000 in the form of three-year and five-year tranches with an option to extend the three-year tranche to five years. Twenty-eight banks (including a number of South African banks) participated in the syndication. The facility is for general corporate purposes of the Sasol Group and provides access to foreign funds for Sasol’s offshore activity.

Commercial paper issue  In a landmark deal, Sasol Financing issued one-year non-listed commercial paper for R1 100 million on 19 March 2001. This is one of the biggest single placements of commercial paper by a listed corporate in South Africa.

Asset-based finance  A portion of the funding required for the acquisition of Condea, renamed Sasol Chemie, was financed by way of asset-based finance, which consists of a Euro 470 million and US$165 million syndicated multi-currency term loan and revolving credit facilities. A total of 28 banks (international and local) participated in the syndication, which was more than two times oversubscribed.

A very competitive traded yield has been obtained at a level significantly cheaper than normal commercial bank funding.

Prospects  Sasol Financing will continue to play an integral role as arranger and provider of Sasol’s global funding requirements. The bedding down of Sasol Chemie and the emergent projects such as the Mozambique natural gas project and the gas-to-liquids projects in Nigeria and Qatar, among many other capital-intensive growth initiatives, will require high level expertise in the field of local and foreign fund-raising, where Sasol Financing is already well positioned.