South Africa Says Eskom Creditors Won’t Lose Out in Restructure

(Bloomberg) -- South Africa has laid out a timeline for the restructuring of Eskom Holdings SOC Ltd.. and pledged that creditors of the state-owned power company won’t suffer losses, according to a fund manager who attended a briefing by the head of the country’s Treasury.

Treasury Director-General Dondo Mogajane set out the steps in a meeting with investors in London on Tuesday, according to the person, who asked not to be identified because the event wasn’t public. The Treasury declined to comment, saying the meeting “was held behind closed doors.”

According to the fund manager, Mogajane said:

• The government bailout announced by President Cyril Ramaphosa in his state-of-the-nation speech last week would enable Eskom to function as a going concern for two years
• An appropriation bill for the bailout would be approved by the end of July
• A chief restructuring officer and team have been identified, and will be announced in mid-July
• The CRO will produce a plan to deal with Eskom’s debt within 18 months; the government guarantees that investors won’t suffer losses
• Eskom will be unbundled in two years, which will close some of the cash-flow gap. After that, the government will decide whether a further bailout is needed
• The Eskom bailout is more important to South Africa than losing the country’s investment-grade rating at Moody’s Investors service, though he doesn’t think it would lead to a downgrade

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Eskom has more than 440 billion rand ($31 billion) of debt, including $5.5 billion of Eurobonds, and doesn’t generate enough cash to service it. About two-thirds of the debt is guaranteed by the government. The company supplies almost all the country’s electricity and was forced to initiate managed blackouts earlier this year.

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