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Eskom’s biggest creditor sees barriers to debt-for-equity swap

With R82 billion of Eskom bonds, the GEPF holds about a fifth of the utility provider’s debt.
Image: Waldo Swiegers/Bloomberg

South Africa’s Government Employees Pension Fund, the biggest investor in Eskom debt, said there were significant hurdles to a proposal that its bonds be converted to equity to help rescue the struggling power monopoly.

The initiative, which has been backed by the country’s biggest labour unions, was first examined by the Public Investment Corp., which manages most of the pension fund’s investments, but the GEPF has not been formally approached about a potential swap, its investment chief said.

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“We have heard that narrative being spoken of but the GEPF itself has not been approached,” Sifiso Sibiya told Bloomberg in an interview on November 22. If it was, then “members interests would be borne in mind and put first in terms of expecting returns and not negatively affecting investment outcomes.”

Swapping debt for equity was a complicated proposition, he said, because it would also require the R2.09 trillion fund to rebalance its holdings across asset classes to comply with its allocation rules.

With R82 billion ($5.2 billion) of Eskom bonds, the GEPF holds about a fifth of the utility provider’s debt. Eskom’s bonds provide significantly above inflation yields, with debt due in 2026 currently returning 8.94%, but the company has been struggling to cover its own running costs and interest payments and is dependent on government handouts.

The GEPF remains concerned about the performance of state-owned companies, Sibiya said, and hasn’t increased its exposure to Eskom.

“Currently around 90-odd percent of our Eskom debt is government guaranteed and we would wish for that to remain in place,” he said.

South Africa’s utility giant can’t sell enough power to cover its costs and hasn’t properly maintained its aging coal plants. But labour unions, key allies of the president, oppose the restructuring plans that management says are necessary. The result has been a prolonged crisis in the country’s power sector.

In addition to the debt-for-equity swap, other proposals that have been considered include the government taking over half of Eskom’s debt.

© 2021 Bloomberg

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This business borrowed money from its employees to finance ANC BEE tenderpreneurs and state captures, and because its business model is a failure, it wants to turn those lenders into shareholders and employees into owners? What a beautiful example of socialism in action! “The land belongs to those who work it”. This bankrupt monstrosity is the Freedom Charter in action.

The fools who financed the entire process are about to be fleeced again when they exchange their worthless loans to a bankrupt company for worthless shares in a bankrupt company. They are merely prolonging the game of make-belief and postponing the inevitable.

The same government that guarantees the Eskom debt also guarantees the GEPF. If the Eskom debt bankrupts the government, the GEPF guarantee will be worthless, and the other way around. Houston, we have a problem.

The largest percentage of government employees are also Cosatu members and ANC supporters. Therefore, The ANC plundered some members of the Alliance, to enrich other members of the Alliance. They steal from each other under the table, while they cozy up to each other above the table. When a communist organization joins hands with a socialist organization, to control the resources of the nation, the consequences can only be economic mayhem.

Perfectly analysed!

What’s that old saying: robbing Peter to pay Paul? But I must disagree with you in your description of Eskom as a “business” which it is in the strict sense of the word, but in reality it’s a Ponzi scheme where we the taxpayers are the suckers.

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