MARK BARNES: We will find out how much Eskom is worth if its debt is converted to equity
Proposed GEPF transaction would change the ownership of Eskom and the rules of governance
Converting debt into equity is a serious decision. Equity investment requires insight into and understanding of the future earnings and growth prospects of the entity into which you are about to place capital at risk.
Debt risk assessment is a lot simpler, primarily focusing on issues of solvency and liquidity. Can the entity service and repay your loan? The coupon on debt is usually fixed, regular and compulsory, unless the entity is facing bankruptcy, in which case the equity is worthless anyway.