IDC must restructure R20bn worth of debt
by Agency Staff,
2016-02-10 17:27:07.0
THE Industrial Development Corporation (IDC) needs to restructure about R20bn of debt, half of that because of the drop in commodity prices, which has also prompted SA’s state-owned financier to consider delaying a $5bn steel-mill venture with a Chinese partner.
The IDC is finalising a feasibility study for the mill, CEO Geoffrey Qhena said. It would make as much as 5-million tonnes of steel annually, or about 71% of SA’s current capacity, and comes as other producers such as the local unit of ArcelorMittal are cutting jobs and closing plants as they struggle to compete against cheap imports from China.
The Bloomberg Commodity Index of returns on raw materials slumped to a 25-year low last month, with copper, zinc and lead recently touching multiyear lows as continued weakness in the economy in China, the world’s largest metals consumer, curbs demand.
"The longer it goes, the more worried we become," Mr Qhena said in an interview in Cape Town on Wednesday, referring to the commodity-price rout. "There will probably be more blood than we’ve seen now."
Restructuring could entail payment holidays and converting debt into equity, he said, adding that the level of impairments the IDC has recorded in the year that ends in March is higher than it had been before.
Among the IDC’s mining and metals investments are stakes in ArcelorMittal SA, the continent’s biggest steelmaker, Kumba Iron Ore and Oakbay Resources, which is controlled by the Gupta family, who are friends of President Jacob Zuma and are in business with his son.
The IDC and its partner in the steel venture, Hebei Iron & Steel Group, will announce by the middle of this year when the project will proceed, Mr Qhena said.
"We’re now having conversations on the timing of this," he said. "It is taking a little bit longer. The cycle where we find ourselves does not help."
The IDC has about R100bn of debt and equity investments, Mr Qhena said.
Bloomberg
Geoffrey Qhena, CEO of the Industrial Development Corporation. Picture: SUNDAY TIMES
THE Industrial Development Corporation (IDC) needs to restructure about R20bn of debt, half of that because of the drop in commodity prices, which has also prompted SA’s state-owned financier to consider delaying a $5bn steel-mill venture with a Chinese partner.
The IDC is finalising a feasibility study for the mill, CEO Geoffrey Qhena said. It would make as much as 5-million tonnes of steel annually, or about 71% of SA’s current capacity, and comes as other producers such as the local unit of ArcelorMittal are cutting jobs and closing plants as they struggle to compete against cheap imports from China.
The Bloomberg Commodity Index of returns on raw materials slumped to a 25-year low last month, with copper, zinc and lead recently touching multiyear lows as continued weakness in the economy in China, the world’s largest metals consumer, curbs demand.
"The longer it goes, the more worried we become," Mr Qhena said in an interview in Cape Town on Wednesday, referring to the commodity-price rout. "There will probably be more blood than we’ve seen now."
Restructuring could entail payment holidays and converting debt into equity, he said, adding that the level of impairments the IDC has recorded in the year that ends in March is higher than it had been before.
Among the IDC’s mining and metals investments are stakes in ArcelorMittal SA, the continent’s biggest steelmaker, Kumba Iron Ore and Oakbay Resources, which is controlled by the Gupta family, who are friends of President Jacob Zuma and are in business with his son.
The IDC and its partner in the steel venture, Hebei Iron & Steel Group, will announce by the middle of this year when the project will proceed, Mr Qhena said.
"We’re now having conversations on the timing of this," he said. "It is taking a little bit longer. The cycle where we find ourselves does not help."
The IDC has about R100bn of debt and equity investments, Mr Qhena said.
Bloomberg
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