Eskom’s Nqaba Sidesteps 5 Billion-Rand Debt Buyback

Eskom SOC Ltd. said noteholders will probably amend rules that force one of its units to repay 5 billion rand ($552 million) of debt after Fitch Ratings lowered its assessment of South Africa’s power utility.

Eskom Finance Co., the division of the electricity company that advances mortgages to employees, has listed bonds through a special purpose company called Nqaba Finance 1 (Pty) Ltd. Fitch downgraded Johannesburg-based Eskom on Jan. 11 following its reassessment of South Africa’s sovereign rating. Nqaba has the option to waive the early repayment with noteholders’ approval, Eskom spokeswoman Hilary Joffe said in an e-mail.

“Noteholders have been contacted and they indicated that they will support waiving the early amortization event and re- instate the revolving period,” Joffe said. “They also agree in principle to the changing of the documentation that will effectively reduce the early amortization event if Eskom is to be downgraded further.” Neither Eskom Finance or Nqaba want the bonds to be repaid early, she said.

Fitch downgraded the credit rating of Africa’s largest economy to the second-lowest investment grade on Jan. 11 following the worst labor unrest in mines, transport and farms since the end of white minority rule. Moody’s Investors Service and Standard & Poor’s cut the country’s credit assessment in September.

Owners of Nqaba’s debt will convene a meeting on either Feb. 15 or Feb. 16 to change the documentation, Joffe said. Nqaba has until Feb. 22 to amend the rules. Two-thirds of the debtholders present must vote in favor of the changes, she said.

To contact the reporter on this story: Jaco Visser in Johannesburg at avisser3@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net