{"id":551562,"date":"2022-01-18T13:35:00","date_gmt":"2022-01-18T11:35:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=551562"},"modified":"2022-01-18T13:35:00","modified_gmt":"2022-01-18T11:35:00","slug":"rothschild-hired-to-help-steer-eskoms-debt-revamp","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/energy\/551562\/rothschild-hired-to-help-steer-eskoms-debt-revamp\/","title":{"rendered":"Rothschild hired to help steer Eskom’s debt revamp"},"content":{"rendered":"

Eskom Holdings\u2019s creditors started working with financial advisory firm Rothschild & Co. as South Africa\u2019s struggling power utility prepares a long-awaited reorganization aimed at returning it to profit and lightening its debt load.<\/p>\n

Bondholders are forming a common front to protect their interests as the state-owned company takes steps to split into three entities, according to people familiar with the matter who asked not to be identified because the information is private.<\/p>\n

While Eskom\u2019s R392 billion ($25.4 billion) of debt will remain under the holding company for now, some bondholders fear it may be distributed across financially weaker units, they said.<\/p>\n

Saving Eskom is a massive undertaking, with South Africa\u2019s economy at stake as it struggles to supply uninterrupted electricity.<\/p>\n

President Cyril Ramaphosa first\u00a0announced\u00a0a turnaround plan in 2019, though progress has been slow as the details are debated,\u00a0especially\u00a0around the debt pile, which Eskom wants the government to help cut in half.<\/p>\n

The company needs the consent of creditors before completing the spinoff of its transmission unit. In a\u00a0presentation\u00a0published last month, the utility said it \u201cbelieves that the unbundling of the transmission unit business to the National Transmission Co. of South Africa will not negatively affect Eskom\u2019s existing debt facilities.\u201d<\/p>\n

Revenue streams<\/strong><\/p>\n

But creditors are concerned that revenue streams and earnings may be affected, eroding the company\u2019s ability to service and repay the loans. Unsecured creditors may be those with the most to lose, as they would have recourse to a smaller portion of Eskom\u2019s assets, the people said. About 74% of Eskom\u2019s debt is guaranteed by the government.<\/p>\n

Eskom\u2019s dollar yields have climbed to the highest levels since March, in line with the rise in global yields as the Federal Reserve moves closer to raising interest rates. But the premium investors demand to hold the company\u2019s unsecured debt rather than bonds guaranteed by the government has widened in recent weeks, suggesting some investor anxiety.<\/p>\n

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

A spokesperson for Rothschild declined to comment. Eskom wasn\u2019t immediately able to comment.<\/p>\n

Eskom has begun the legal separation of its transmission unit, designed to help open the grid to private suppliers and allay electricity shortages that have curbed economic growth.<\/p>\n

As part of the reorganization, a significant portion of the debt is to be\u00a0housed\u00a0in the generation unit, whose program to build new capacity resulted in defective, over-budget, coal-fired plants yet to be completed.<\/p>\n

The split of that business along with the distribution arm is expected to start later this year. The company said last month it will engage with creditors to gather their feedback on future unbundling steps. It is working with Lazard Ltd. as financial adviser and the legal firm White & Case LLP on its restructuring plan.<\/p>\n

Eskom has also\u00a0warned\u00a0that it needs the debt to be resolved in order to accept $8.5 billion in grants and loans from wealthy nations — made at the COP26 climate summit– to help South Africa move away from coal.<\/p>\n

The unbundling of the three operational units would give the government a better idea of the valuations of those entities, after which it would decide how to distribute the debt and deal with any remaining amount, Public Enterprises Minister Pravin Gordhan said in an\u00a0interview\u00a0in November.<\/p>\n

Finance Minister Enoch Godongwana would have to decide whether the government assumes part of Eskom\u2019s debt by the time of the budget in February, giving consideration to the serious fiscal constraints the country is facing, Gordhan said.<\/p>\n

\n

Read: Eskom plans further electricity price hikes for South Africa<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Eskom Holdings\u2019s creditors started working with financial advisory firm Rothschild & Co. as South Africa\u2019s struggling power utility prepares a long-awaited reorganization aimed at returning it to profit and lightening its debt load.<\/p>\n","protected":false},"author":59,"featured_media":551564,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9874],"tags":[1164,26],"class_list":["post-551562","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-energy","tag-eskom","tag-headline"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/551562","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=551562"}],"version-history":[{"count":2,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/551562\/revisions"}],"predecessor-version":[{"id":551570,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/551562\/revisions\/551570"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/551564"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=551562"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=551562"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=551562"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}