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Eskom Debt Is a Buy Because of ‘Scarcity Value,’ Citigroup Says

SOUTH AFRICA
  • Eskom bonds are priced cheaply and there’s been a slowdown in new issuance in the market, which should help narrow spreads, according to analysts
  • They recommend buying Eskom’s unguaranteed tranche of 2028 notes, which are trading at a premium to South Africa’s sovereign securities.
  • They acknowledge Eskom’s ailings, saying there’s no good news on the horizon. The company is in the middle of a restructuring aimed at returning it to profit and lightening its 392 billion rand ($25.4 billion) debt load.
  • Yields on the utility’s unsecured 2028 dollar bonds have climbed 70 basis points this month to 7.69%. That’s widened the spread versus similar-maturity sovereign debt by about 30 basis points to 320
  • The median level for the two is closer to 240 points, Citigroup said. The analysts will target the difference between Eskom and the sovereign, implying some 70 points of upside, with a stop loss of 400 points
MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com
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MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com
BulletEM BulletEmerging Market NewsHomepage

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