Mugabe Seizing Impala Assets Impales Bonds: South Africa Credit
By Mike Cohen & Jaco Visser - Mar 7, 2013 8:36 AM ET
Impala Platinum Holdings Ltd.’s (IMP) yields climbed to within two basis points of a record after Zimbabwe said the company’s unit in the nation must cede 51 percent ownership to the country without compensation.
Yields on the second-biggest platinum producer’s rand- denominated convertible debt due in February 2021 rose 14 basis points to 5.23 percent yesterday, after Zimbabwe backtracked on a pact to pay the company for the assets. The rate compares with a two basis-point drop in average dollar yields of companies in the JPMorgan Chase & Co. CEMBI Metals & Mining
index.
Impala, which owns 87 percent of
Zimplats Holdings Ltd. (ZIM), on Jan. 11 signed terms to sell a majority stake to black Zimbabweans and the government for $971 million. On March 1, President
Robert Mugabe said the country, which has the world’s largest known platinum and chrome reserves after
South Africa, shouldn’t pay for a stake in Zimplats because all natural resources belonged to the state. The announcement meant Impala’s holding in the unit has to be ceded without payment, Indigenization Minister
Saviour Kasukuwere said in an interview yesterday.
“There are extraordinarily high risks doing business in Zimbabwe,” Ryan Wibberley, a trader at Investec Asset Management, said by phone from
Cape Town. “The government takes these companies to the brink.”
Seize Land
Kasukuwere’s comments come a day after Johannesburg-based Impala, the world’s second-biggest platinum producer, said about 27,948 hectares (69,061 acres) of the company’s land, equating to 50 percent of Zimplats’ mining claims, would be seized by the state, following a March 1 decree in the Government Gazette.
The companies are taking legal advice, Impala said in a March 5 statement.
The impact of the Zimbabwean government’s actions on Impala will be limited and will mainly affect the share price rather than the bonds, according to Rashaad Tayob, a portfolio manager who oversees fixed-interest investments among $6.2 billion of assets at Cape Town-based Abax Investments.
“The biggest component of Impala is its local operations,” he said in a phone interview yesterday, referring to the world’s biggest platinum mine, which lies north west of Johannesburg. “Even before the bonds were issued, there was already a lot of speculation and uncertainty about what would happen. A lot of that risk was already priced in.”
Stocks Drop
On Feb. 15, Impala said it sold 2.67 billion rand ($294 million) of convertible rand-denominated bonds and $200 million of dollar debt due in February 2018. It pays a 5 percent coupon on the rand debt and 1 percent on the dollar securities, which are both convertible into shares at a premium of 35 percent to the market value of the stock.
The shares fell 19 percent this year to 134.61 rand by the close in Johannesburg yesterday, compared with a
3 percent gain in the FTSE/JSE Africa All Share index.
Impala’s profit declined 78 percent for the six months through December, missing analysts’ estimates, because of a six- week strike at its South African operations, while costs per refined ounce surged 52 percent. The price Impala got for platinum in the period fell 7.9 percent to $1,541 an ounce from a year earlier.
“
Zimbabwe isn’t the only reason for the share-price drop,” Wibberley said. “You have a lot of shareholders who went through a lot of pain last year and held on. Then they issue a convertible bond and the shareholders hold on. Then their results came out and they hold on. And then there’s just one more thing and then they let go.”
Rand Decline
Calls to the phone of Zimplats Chief Executive Officer Alex Mhembere in Harare weren’t answered.
The rand slipped 0.4 percent to 9.1608 per dollar by 3:28 p.m. in Johannesburg. That extended its decline this year to 7.5 percent, the worst performer this year among 25 emerging-market currencies tracked by Bloomberg this year.
Yields on
Aquarius Platinum Ltd. (AQP)’s convertible bonds due December 2015 fell 66 basis points, or 0.66 percentage point to 12.11 percent yesterday, while the rate on South Africa’s rand debt due in December 2018 was unchanged at 6.09 percent.
Zimbabwe’s so-called indigenization laws, passed in 2011, compel all foreign- and white-owned businesses to sell or surrender controlling stakes to black Zimbabweans or the government. The country, which has been ruled by a coalition government since 2009, is due to hold elections after a March referendum on a new constitution.
While Mugabe’s Zimbabwe African National Congress-Patriotic Front is backing the indigenization laws Prime Minister
Morgan Tsvangirai, who leads the Movement for Democratic Change, has criticized them.
“There will be greater clarity on the indigenization after the referendum,” Stephen Meintjes, head of research at stockbroker Imara S.P. Reid, said in a phone interview yesterday. “Things will calm down and sobriety will return.”
