Financial News in South Africa 28th November:

1. SAA at a breaking point:

SAA is close to collapse. The department of public enterprises issued a warning last night that due to the strikes SAA has reached a point where the company can no longer continue to operate “as is”.

In a statement issued on Wednesday afternoon, the department said the strike at SAA, and the cancellation of bookings that followed, resulted in a sudden deterioration of SAA’s financial position.

“Accordingly, the Department of Public Enterprises is working together with SAA to urgently formulate immediate actions that will be required to provide support to enable SAA to carry on its business.

The statement said government efforts, under minister Pravin Gordhan, are focused on ensuring that the airline is stabilised, governance and leadership issues are addressed and the airline returns to a stronger financial footing in the medium to longer term.

2. Uk food retailer, Brait, recieves overhaul:

Brait, which owns Virgin Active, the UK food retailer Iceland and the embattled UK clothing chain New Look, has announced a major rehaul, including a large rights issue.

Shares in investment holding company Brait slumped by 14% in early trade on Wednesday morning after it announced plans to raise up to R5.6bn in equity to reduce its debt.

Businessman Christo Wiese is the biggest shareholder in Brait, which owns Premier Foods, Virgin Active and the UK retailer Iceland, as well as struggling UK clothing group New Look.

In an update to shareholders, Brait said it intends to undertake an equity capital raise of between R5.25bn and R5.6bn. This will comprise a fully underwritten rights offer of R5.25bn, and a specific issue of shares of up to R350m at the rights offer price.

3. SA business confidence improving:

For the first time in two years, it looks like South Africa’s business confidence is improving, according to a new Rand Merchant Bank index.

4. Moody’s downgrade could risk major selloff:

SA Reserve Bank Deputy Governor Kuben Naidoo expects that if SA loses its investment grade rating from Moody’s, investors will sell between R74bn  and R118bn in South African bonds.

Moody’s this month cut its outlook on South Africa’s rating to negative, meaning the next move could be a reduction to junk because its current assessment is the lowest investment grade. That would bring it into line with S&P Global Ratings and Fitch Ratings.

5. Steinhoff sells stake in Unitrans:

Steinhoff on Wednesday named Kapela Holdings as its Broad-Based Black Economic Empowerment partner in its deal to sell its shareholding in car dealer network Unitrans.

The retail conglomerate in March announced the share sale in Unitrans, which operates 99 dealerships throughout South Africa, but did not at the time name its B-BBEE partner.

Steinhoff is selling 74.9% of the car dealership’s share capital to CFAO Holdings South Africa, a 100%-owned subsidiary of CFAO, which falls under Japan’s Toyota Tsusho Corporation.

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