{"id":317980,"date":"2019-05-20T15:00:27","date_gmt":"2019-05-20T13:00:27","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=317980"},"modified":"2019-05-20T15:00:27","modified_gmt":"2019-05-20T13:00:27","slug":"eskoms-breakout-rally-on-ramaphosas-pledge-leaves-some-uneasy","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/energy\/317980\/eskoms-breakout-rally-on-ramaphosas-pledge-leaves-some-uneasy\/","title":{"rendered":"Eskom’s breakout rally on Ramaphosa’s pledge leaves some uneasy"},"content":{"rendered":"
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Some investors in Eskom Holdings SOC Ltd\u2019s bonds are taking president Cyril Ramaphosa at his word – that South Africa won\u2019t allow the state-owned entity to fail.<\/p>\n

Yields on the company\u2019s 2021 dollar-denominated bonds have declined every day since May 14, and were down 29 basis points on Monday at 5.85%, the lowest since Feb. 26. And its 2028 notes are among the top performers in the Bloomberg Barclays index for emerging-market dollar debt, which has 1,934 members.<\/p>\n

Other investors say the optimism is premature.<\/p>\n

\u201cThe situation at Eskom is still extremely delicate,\u201d said Mike van der Westhuizen, portfolio manager at Citadel Holdings Ltd in Johannesburg. \u201cThere are still tough decisions that need to be made, and they need to be made urgently. Until a realistic and credible turnaround strategy, with timelines, is announced, we remain very cautious on Eskom, as well as South Africa sovereign-credit risk.\u201d<\/p>\n

The embattled utility\u2019s debt burden, described by Goldman Sachs Group Inc as the biggest threat to the nation\u2019s economy, is approaching 500 billion rand ($35 billion), according to data compiled by Bloomberg from public records, including bonds and issued loans. It\u2019s up from about R370 billion a year ago.<\/p>\n

Bailout Ideas<\/strong><\/p>\n

While the government allocated Eskom a R69 billion ($4.8 billion) cash injection over the next three years in the February budget, another bailout that may entail a swap of the company\u2019s debt into government bonds may be on the cards.<\/p>\n

A further option under consideration is the creation of a special-purpose vehicle, owned by National Treasury, that would take over a large portion of Eskom\u2019s debt and would have the advantage of being able to raise blended finance.<\/p>\n

Moody\u2019s Investors Service, S&P Ratings and Fitch all rate the company as junk.<\/p>\n

Even holders of the bonds remain wary about the company\u2019s ability to stabilize.<\/p>\n

\u201cEskom is not profitable with a high debt load and needs a lot of investments to maintain operation,\u201d said Eugene Choi, portfolio manager at Pictet Asset Management. \u201cIt is part of our investable universe and we do hold it in our portfolios. That said, it\u2019s not a name that we like.\u201d<\/p>\n

\"\"<\/a><\/p>\n

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Read: Eskom\u2019s plan to raise R200 billion through new finance model<\/a><\/strong><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Some investors in Eskom Holdings SOC Ltd\u2019s bonds are taking president Cyril Ramaphosa at his word – that South Africa won\u2019t allow the state-owned entity to fail.<\/p>\n","protected":false},"author":59,"featured_media":288044,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9874],"tags":[14028,1164,1999,26,14030],"class_list":["post-317980","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-energy","tag-citadel-holdings","tag-eskom","tag-goldman-sachs","tag-headline","tag-pictet-asset-management"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/317980","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/59"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=317980"}],"version-history":[{"count":1,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/317980\/revisions"}],"predecessor-version":[{"id":317984,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/317980\/revisions\/317984"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/288044"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=317980"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=317980"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=317980"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}