Eskom Wants South Africa to Take Over Majority of its Debt
Eskom Wants South Africa to Take Over Majority of its Debt
(Bloomberg) -- Eskom Holdings SOC Ltd. has told bondholders that it wants the majority of its 440 billion rand ($29 billion) of debt transferred to the South African government.
The struggling state power utility can only sustain 150 billion rand of debt, company executives at a road show in London on Wednesday told investors, said Ksenia Mishankina, a senior credit analyst at Union Bancaire Privee Ubp SA, who attended the meeting. The discussions follow the announcement last week of Eskom’s record 20.7 billion rand annual loss.
Eskom wants the government to transfer the debt it has guaranteed onto the state’s balance sheet. At the end of the fiscal year in March, the company had utilized 295 billion rand of the guarantees offered by the government, according to the National Treasury. South Africa recently increased its Eskom bailout to 128 billion rand over the next three years to keep the state-owned company afloat, as it implements a plan to make the business profitable.
“We are having business update discussions with investors,” Dikatso Mothae, a spokeswoman for Eskom, said in a reply to questions about the meeting. The yield on the utility’s 2025 dollar bonds declined 10 basis points during the day.
The state-owned company is hoping for resolutions to some of its problems and progress on a plan to split into three units after the National Treasury’s mid-term budget in October, the executives said, according to Mishankina. They also want the government to resolve the problem of unpaid debt from some of Eskom’s municipal customers.
Moody’s Investors Service on Tuesday warned that Eskom’s operational and financial performance has deteriorated to the point that it urgently needs to take steps toward turning the business around.
The 150 billion rand figure is derived from an assessment that it can sustain debt of five times earnings before interest, taxes, depreciation and amortization. A number of other people who attended the meeting declined to comment.
--With assistance from Oliver Telling and Paul Burkhardt.
To contact the reporters on this story: Antony Sguazzin in Johannesburg at asguazzin@bloomberg.net;Lyubov Pronina in Brussels at lpronina@bloomberg.net
To contact the editors responsible for this story: John McCorry at jmccorry@bloomberg.net, Gordon Bell, Liezel Hill
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