Nedbank Group Ltd. is leading discussions to restructure South African power utility Eskom Holdings SOC Ltd.’s R464 billion ($32 billion) debt load, Bloomberg reported.
The parties met in recent days, and one of the options is to transfer at least R100 billion of debt to a special-purpose vehicle that would be overseen by the Public Investment Corp. Africa’s biggest fund manager.
"Eskom intends to work constructively with all its creditors to develop a plan that will improve the company’s balance sheet while adequately catering for the requirements of its lenders and other stakeholders, " the utility said in response to questions.
"The utility is in regular discussions with its stakeholders to agree on the best solution to shape the balance sheet as the company moves to the next phase of its strategy."
The utility can’t meet its costs and is subjecting the country to intermittent power outages as a result of inadequate maintenance at its ageing fleet of coal-fired power plants.
The yield premium of Eskom’s 2028 dollar bonds over comparable government debt narrowed on Friday to the least in 17 months, suggesting bondholders are gaining confidence in a rescue plan.
"We continuously engage with strategically important state-owned companies including Eskom," Nedbank said.
"These constructive engagements are held with positive intent, together with other financial institutions and respective shareholders, and focus on creating solutions in respect of liquidity challenges faced by state-owned companies."
Eskom has previously said it can only service about R200 billion of debt, and lenders may help it meet some of its upcoming interest payments, according to sources.
The PIC, which oversees the pensions of South African government workers, manages R1.91 trillion of assets, including about R90 billion of Eskom’s bonds.
The company has previously supported a failing retailer – Edcon Holdings Ltd. – and has invested heavily in the debt of other struggling state-owned entities.
It has previously proposed converting the Eskom debt it holds into equity.
The Congress of South African Trade Unions, a key supporter of President Cyril Ramaphosa, has repeatedly urged the use of PIC funds to rescue Eskom.