Select Country
Don’t have your Nedbank ID yet?
Nedbank ID single sign-on gives you full digital access to Nedbank’s banking and lifestyle products and services on the Money app or Online Banking.
Log in
Log in to Online Banking or another one of our secured services.
Get in touch
Find us
- Login & Register
- Online Banking
- Online Share Trading
- NedFleet
- Register for Nedbank ID
- About us
- Awards
- Deals
- Explore About us
- Awards
- Deals
- R4bn Tronox deal funds two 100MW solar plants
- Billions to help Redefine build green properties
- Harmony pursues green goals with R10 billion loan
- Cold solutions finance for cold storage facilities
- International Finance Corporation green bond fund
- Envusa energy deal: The way for renewable energy
- Paladin Energy senior debt funding partnership
- Renewable energy wind farm financing
- Stor-Age’s successful inaugural bond auction
- R4bn Tronox deal funds two 100MW solar plants
- Billions to help Redefine build green properties
- Harmony pursues green goals with R10 billion loan
- Cold solutions finance for cold storage facilities
- International Finance Corporation green bond fund
- Envusa energy deal: The way for renewable energy
- Paladin Energy senior debt funding partnership
- Renewable energy wind farm financing
- Stor-Age’s successful inaugural bond auction
- Women of Corporate Investment Banking
- Young Analyst Programme
- Insights
- Articles
- Conferences
- Research
- Explore Insights
- Articles
- Africa's pathway to a climate-resilient economy
- Commercial property trends 2022
- Green energy in the developing world | Nedbank CIB
- How sustainable finance creates value
- How the property sector recovered in 2023
- Two wins for sustainable finance leadership | Nedbank CIB
- FURTHER IMPACT empowerment for entrepreneurs
- There's a new buoyancy around water and sanitation
- What happens when finance meets sustainability?
- Africa’s renewable-energy projects
- Breaking barriers for energy transition in mining
- Africa's pathway to a climate-resilient economy
- Commercial property trends 2022
- Green energy in the developing world | Nedbank CIB
- How sustainable finance creates value
- How the property sector recovered in 2023
- Two wins for sustainable finance leadership | Nedbank CIB
- FURTHER IMPACT empowerment for entrepreneurs
- There's a new buoyancy around water and sanitation
- What happens when finance meets sustainability?
- Africa’s renewable-energy projects
- Breaking barriers for energy transition in mining
- Conferences
- Industry leaders talk innovation disruption | Nedbank CIB
- Market leaders in property finance | Nedbank CIB
- African Mining Indaba | Nedbank CIB
- COP 28 | Nedbank CIB
- South Africa (SA) Auto Week | Nedbank CIB
- IHS Affordable Housing Conference | Nedbank CIB
- Africa Energy Forum | Nedbank CIB
- Digital Immersion Conference | Nedbank CIB
- NCIB’s Zhann Meyer speaks at annual GTR MENA 2025 | Nedbank CIB
- Industry leaders talk innovation disruption | Nedbank CIB
- Market leaders in property finance | Nedbank CIB
- African Mining Indaba | Nedbank CIB
- COP 28 | Nedbank CIB
- South Africa (SA) Auto Week | Nedbank CIB
- IHS Affordable Housing Conference | Nedbank CIB
- Africa Energy Forum | Nedbank CIB
- Digital Immersion Conference | Nedbank CIB
- NCIB’s Zhann Meyer speaks at annual GTR MENA 2025 | Nedbank CIB
- Research
- Investor research
- Investor-research
- How loadshedding impacts inflation | Nedbank CIB
- Investor Research
- Investor Research
- Investor Research
- Investor Research
- Investor Research
- Investor Research
- Investor Research
- Investor Research
- SA inflation trends, insights and projections
- SA ex-ante real policy rate
- SARB: Shifting to a 25 bps hike, from 50 bps
- SARB MPC: Repo unchanged but still hawkish
- Bonds, the monetary surprise and fiscal dominance
- Upside for bond investments has compressed
- The "weak China trade" on the rand exchange rate
- Dovish inflation surprises and fiscal constraints
- The ILB curve steepens, and we expect more
- Investor Research
- Investor research
- Investor-research
- How loadshedding impacts inflation | Nedbank CIB
- Investor Research
- Investor Research
- Investor Research
- Investor Research
- Investor Research
- Investor Research
- Investor Research
- Investor Research
- SA inflation trends, insights and projections
- SA ex-ante real policy rate
- SARB: Shifting to a 25 bps hike, from 50 bps
- SARB MPC: Repo unchanged but still hawkish
- Bonds, the monetary surprise and fiscal dominance
- Upside for bond investments has compressed
- The "weak China trade" on the rand exchange rate
- Dovish inflation surprises and fiscal constraints
- The ILB curve steepens, and we expect more
- Investor Research
- Solutions
- Corporate Finance
- Financing
- Investing
- Markets
- Nedbank Business Hub
- Transacting
- Explore Solutions
- Corporate Finance
- Financing
- Investing
- Markets
- Research disclaimer
- Research disclaimer
- Nedbank Business Hub
- Transacting
- Sustainability
- Explore Sustainability
- Contact us
- Explore Contact us
Eskom debt transfer solutions
We look at some at some of the details likely to be key to the success of Eskom’s debt transfer plans.
Eskom’s debt transfer is likely to be South Africa’s largest liability-management exercise, with the National Treasury indicating that one- to two-thirds of Eskom’s R400bn outstanding debt could be transferred to the sovereign’s balance sheet in 2023.
We believe that there some key issues that need to be addressed before executing a debt plan of this magnitude.
Many questions remain
While the intention behind the much talked-about sovereign debt solution for Eskom is good, more details are required to make sense of the execution risks and the likely outcomes for noteholders.
These critical details include which debt will be assumed first, the size of debt relief required and whether this is a prerequisite to completing Eskom’s divisional unbundling, whether rating agencies would consider the plan a distressed or an opportunistic debt exchange, and when noteholder consent will be solicited.
Sequencing as important as the quantum
In our opinion, if not for the recent fiscal revenue windfalls, the rationale for this debt transfer would have been much harder to accept in terms of its scale, complexity and fiscal impact.
We think sequencing the transaction – starting with term loans and progressing to bonds – is ideal, but Eskom’s current financial standing might call for a more accelerated approach to bring it cashflow relief sooner. We assume R130bn (33%) of development finance institution (DFI) and other rand-denominated term loans and hedges are first in line for transfer to the sovereign as this reduces execution risk with fewer credit counterparties to negotiate with.
To reach two-thirds of debt outstanding, we’ve calculated that R150 bn of bonds would also need to be transferred. The target should be domestic, listed and guaranteed notes (in whole, not in part), while simultaneously redeeming the outstanding Eurorand zero-coupon bonds early to reduce legal complexity between bond programmes. Noteholder consent should be required throughout, and the notice should come shortly after the February 2023 Budget.
Avoiding a distressed exchange
Avoiding a distressed debt exchange (equivalent to a default event) is key. A distressed exchange presumes that notes are haircut and tendered below par and/or that creditors are somehow left worse off in terms of their protections and rights. It also presumes the issuer’s intention with the transaction is to avoid what would have been an inevitable default event had it not been for the debt exchange. It's likely that Eskom will argue that the intention is not to avoid default, but simply to follow government policy in the reform of the electricity sector towards decarbonisation and a more competitive and secure supply profile.
We believe that the rating agencies are unlikely to call Eskom’s debt transfer a distressed exchange, especially given that Moody’s moved Eskom’s rating outlook to “Positive” from “Negative” upon the debt transfer announcement and S&P’s sovereign analysis assumes noteholders will be made whole in the transfer. However, this is conditional on the final details of the deal not violating the impairment rules in their respective methodologies.
Credit-positive for Eskom
Overall, we assume the debt-transfer plan well be credit-positive for Eskom and credit-neutral for the sovereign, adding roughly 3% to the debt-to-GDP ratio baseline. In our view, increasing SAGB supply in this way is typically bearish for the curve, albeit only temporarily. Liquidity will be limited since only Eskom noteholders can participate but a more lasting steepening bias may be driven by global risk-off sentiment, recession concerns and recurrent fiscal expenditure pressures.