SABESP: Equity Raise Starting To Look More Likely

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About: Companhia de Saneamento Básico do Estado de São Paulo - SABESP (SBS)
by: Andri Capital
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Andri Capital
Long/short equity, value, special situations, event-driven
Summary

SBS cancelled a R$750 million debt offering on June 29, 2018.

Company needs capital to fund capital expenditures and debt repayments.

Recent drop in the local currency has made foreign debt refinancing less attractive and more difficult while putting a drag on operating cash flow due to higher interest expenses.

With debt refinancing difficult (abroad and locally) and diminished operating cash flow, SABESP may need to raise equity by selling shares, cutting back on growth expenditures and/or reducing the dividend.

Situation Today

On June 29, 2018 Companhia de Saneamento Basico do Estado de Sao Paulo (or "SABESP") (SBS) cancelled the proposed offering of “simple, unsecured and non-convertible debentures, in up to three series,