Sappi to issue notes for bond payment, expansion

15th April 2013

By: Natalie Greve

Creamer Media Contributing Editor Online


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Sappi Southern Africa will, on April 16, issue senior unsecured rate notes worth some R1.5-billion under its 2011 R5-billion domestic medium-term note programme.

The total notes will comprise R255-million senior unsecured floating rate notes due on April 16, 2016, R500-million senior unsecured floating rate notes due April 16, 2018, and R745-million senior unsecured 8.06% fixed-rate notes due on April 16, 2020.

The majority of the funds would be used to repay a maturing R1-billion bond, while
the balance would be used to fund a portion of the dissolving wood pulp conversion project at the Ngodwana mill, near Nelspruit. 

“In line with our strategy, this successful bond placement further reduces Sappi’s cost of finance and improves our debt maturity profile. We are also satisfied with the positive rates we were able to achieve,” Sappi CEO Ralph Boëttger said on Monday, in reference to the company’s strategy to return to profitability by trimming its cost base.

Engineering News Online reported last month that Sappi had reviewed its business processes, product mix and cost structures in 2012, and had significantly reduced its capacity and overall cost base in Southern Africa, North America and Europe.

“In the past, Sappi invested heavily in businesses in which the current market demand is dropping, such as coated paper. To overcome this, we have embarked on optimising our paper business and are concentrating on improving our higher-margin and faster-growing business areas, specifically dissolving wood pulp, known as specialised cellulose (SC), and specialty packaging,” Boëttger said at the time.

Sappi’s most notable higher-margin business investment was its $340-million investment in its GoCell SC expansion project at its Ngodwana mill, in Mpumalanga, which was on track for commissioning by June.

Project GoCell, which had been under construction since 2011, would increase Sappi Southern Africa’s SC production of 780 000 t/y from its Saiccor mill, in Umkomaas, KwaZulu-Natal, by 210 000 t/y when the Ngodwana mill expansion came on line.

“About 85% of Ngodwana’s expected capacity is already on order from international markets,” noted Boëttger.

A total of two-million tons of timber a year is consumed by the Ngodwana mill.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online




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