Yields on the utility’s unsecured 2028 dollar bonds have climbed 70 basis points in January to 7.69%
26 January 2022 - 14:02
byColleen Goko
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Eskom bonds are enticing Citigroup analysts despite the long-running debt troubles of the state-owned enterprise.
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 Alexander Rozhetskin and Eric Ollom. Their trade idea is to buy Eskom’s unguaranteed tranche of 2028 notes, which are trading at a premium to SA’s sovereign securities.
“We see scarcity value in bonds like Eskom,” they wrote in a note to clients.
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 R392bn debt load.
Yields on the utility’s unsecured 2028 dollar bonds have climbed 70 basis points in January 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.
More stories like this are available on bloomberg.com Bloomberg
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Eskom debt is worth buying, says Citigroup
Yields on the utility’s unsecured 2028 dollar bonds have climbed 70 basis points in January to 7.69%
Eskom bonds are enticing Citigroup analysts despite the long-running debt troubles of the state-owned enterprise.
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 Alexander Rozhetskin and Eric Ollom. Their trade idea is to buy Eskom’s unguaranteed tranche of 2028 notes, which are trading at a premium to SA’s sovereign securities.
“We see scarcity value in bonds like Eskom,” they wrote in a note to clients.
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 R392bn debt load.
Yields on the utility’s unsecured 2028 dollar bonds have climbed 70 basis points in January 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.
More stories like this are available on bloomberg.com
Bloomberg
JOHN DLUDLU: State-owned enterprises fall by the wayside amid political meddling
GRAY MAGUIRE: Becker’s removal another nail in the coffin of nuclear transparency
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Most Read
Related Articles
Nersa faces competing demands in considering Eskom’s proposed 20% tariff hike
STUART THEOBALD: Reasons behind gap between infrastructure talk and reality
SA electricity prices still low, Eskom tells Nersa
Lights to remain on despite rain and Koeberg shutdown
HILARY JOFFE: Still no open markets for electricity and transport
Finance of R300bn needed over 30 years for just transition, says climate report
Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.