Eskom’s new 10-year dollar bonds trade up amid strong investor demand

By Rebecca Melvin

New York, Aug. 3 – South Africa’s Eskom Holdings SOC Ltd.’s $1.5 billion of 10-year notes traded up in secondary market action early Friday after the Johannesburg-based state-owned electric utility priced both government guaranteed and unguaranteed tranches tight to initial talk, according to a syndicate source.

The guaranteed tranche – a $1 billion deal with a 6.35% yield – was quoted at 101 bid, 101.5 offered on Friday after pricing at par.

The non-guaranteed tranche – a $500 million deal with an 8.45% yield – was quoted at 103 bid, 103.5 offered after pricing at par.

“They have done very well despite the high level of tightening and the bad backdrop in the market,” the syndicate source said.

The structure of doing a guaranteed and nonguaranteed tranche was a new one for Eskom but necessary since the company’s financial state has deteriorated over the last several years and the last financial results released were not good.

“They haven’t had the right level of tariff increase to remain a viable entity and questions have been raised if they were going to be able to remain a going concern, so they were obliged at looking at doing the debt issue with a guarantee,” the syndicate source said.

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