Eskom Yields Fall as Restructure Chief Says Debt Plan Days Away

(Bloomberg) --

Proposals to reorganize the 454 billion rand of debt ($30.7 billion) owed by South Africa’s state-owned power company are days away from completion, according to an official who’s overseen their formulation. The company’s Eurobond yields fell by the most since June.

A report that sets out the options for dealing with Eskom Holdings SOC Ltd.’s debt will be submitted to Public Enterprises Minister Pravin Gordhan, who will decide if and when to release it, Freeman Nomvalo, whose tenure as the utility’s outgoing chief restructuring officer officially ended last month, said on the sidelines of an event in Johannesburg. He declined to elaborate on the contents.

Eskom Yields Fall as Restructure Chief Says Debt Plan Days Away

Eskom produces about 95% of South Africa’s electricity, but has been forced to institute rolling blackouts as its old and poorly maintained plants struggle to keep pace with demand. With the utility posing an ever-increasing threat to the nation’s finances, President Cyril Ramaphosa appointed Nomvalo, the head of South Africa’s chartered-accountants’ institute, to his post on July 30 last year. He was tasked with repositioning the company’s finances with a focus on its debt, revenue and cost structure.

Nomvalo’s report has been keenly awaited by Eskom’s creditors and investors, who’ve largely been kept in the dark over the government’s plans to get Eskom’s finances back on a sustainable footing. It’s unclear whether his report will consider recent proposals by the Congress of South African Trade Unions, the country’s biggest labor federation, for the state pension fund manager and state lenders to take on about 250 billion rand of the utility’s debt.

Yields on Eskom’s dollar bonds due 2025 dropped 22 basis points on Thursday to 6.31%, the lowest closing level since October. The cost of insuring the debt for five years using credit-default swaps fell seven basis points to 447, retreating from an 11-month high in January.

©2020 Bloomberg L.P.

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