Transnet will embark on a fire sale of its residential property portfolio to free up cash after receiving requisite approvals from the government, its sole shareholder.
The disposals will be done through auctions in a process that will be speeded up as the group increasingly relies on government guarantees to stay afloat.
The freight and rail group on Thursday said the assets up for sale would exclude employee accommodation, and that the decision to dispose of the assets was informed by recent loss-making performance and heightened risk exposure.
“To action this, Transnet Property has adopted a dual approach, which includes a self-funding component realised through the completion of several disposal transactions for noncore properties, particularly within the residential portfolio, including residential houses, hostels, lodges and line camps,” Transnet said.
“Transnet Property has taken a strategic decision to urgently exit this portfolio, and the noncore properties will be disposed of through several transactions. The auctioneering process will be handled by independent auctioneers to ensure transparency and good governance.”
The sale will exclude those buildings and land parcels that remain core to the state-owned company’s rail, ports, pipelines and engineering businesses.
“The disposal of the residential property portfolio is a strategic imperative, positioning Transnet Property to focus on its main mandate of commercialising the portfolio and maximising returns through best practice asset management principles and standards,” it said.
Transnet in December reported an interim loss of R2.2bn in the six months ended September despite an increase in revenue and improved volumes in its rail business.
The loss was about R600m more than the R1.6bn reported in the comparative period. The move to sell the noncore property portfolio comes as the group has been placed on credit downgrade by two ratings agencies, Moody’s and S&P.
Moody’s last week flagged the slow pace of disposals of Transnet’s noncore assets as one of the challenges facing the group’s balance sheet.
“Asset sales and operational improvements could reduce some of the equity required, but these remain exposed to high execution risk, especially since the company’s progress on noncore asset sales and private sector participations has been slower than we initially expected. No funds have been raised so far and timelines remain uncertain,” Moody’s said.
Transnet’s management is under pressure to effect a quick turnaround of SA’s failing port and rail network after the Treasury on Thursday yielded to pressure to provide the outfit with further support, giving it a R51bn guarantee, taking such interventions to nearly R100bn over the past two years.
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