Tag: default

By Siphelele Dludla for IOL

Eskom has proposed taking over debt laden municipalities as it tries a different approach in recouping around R36-billion in debt arrears that continue to weigh down on its balance sheet.

Chief executive Andre de Ruyter yesterday said the utility was piloting an “active partnering” model where it would over the running of struggling municipalities, like it did with Malutia-Phofung Local Municipality in the Free State.

De Ruyter said non-paying municipalities were a “major problem” to Eskom’s financial sustainability, adding that 70 percent of the arrears debt was owed only by 10 councils.

He said that Eskom had applied a variety of measures to recoup the debt, including the so-called nominated maximum demand and attaching bank accounts and movable assets, but all these efforts had come to nought.

“We are implementing something that we call active partnering. We have tried many levers to persuade municipalities to pay,” De Ruyter said.

“But the model that we think is going to work best is something that we are currently trialing with Malutia-Phofung.”

In July last year, Eskom attached the bank account of Maluti-a-Phofung following a court order granted in 2018 as of its revenue recovery strategy.

Eskom said this was a result of the repeated failures by the municipality to adhere to its payment obligations for the bulk supply of electricity.

De Ruyter said Eskom would step in and acts as the agent for the municipality by maintaining the infrastructure such as substations while assisting with billing and false prepaid metres.

Eskom would also collect revenue on behalf of the municipality and then pays it to its bank account.

“With that part of the revenue into Eskom’s bank account we can assure that the current account is serviced on a regular basis,” De Ruyter said.

“And if you prevent further build up of incremental municipal debt, that’s a very good start towards addressing the debt problem.

“So we certainly think that this active partnering concept is far more a constructive and an appropriate way of engaging with our customers and ensuring that we get paid, and that service delivery can be addressed.”

De Ruyter said there was still a substantial ramp of legacy debt that needed to be addressed.

He said building a financially self-sustainable Eskom was part of his top three priorities.

Though Eskom’s staff costs had come down after 2 000 workers left the power utility last year, De Ruyter said the debt burden was still at unsustainable levels.

“We are currently labouring under an unsustainable net debt burden that varies between R460bn to R485bn, depending on the exchange rate,” he said.

De Ruyter also said that Eskom was not opposed to self-generation for domestic purposes without a license.

President Cyril Ramaphosa last week said the government will begin amending the law to allow for self-generation of between 1MW and 50MW to ease the burden on Eskom.

“There is a narrative that Eskom is opposed to rooftop solar generation, that’s not true,” De Ruyter said.

 

Cell C defaults on loans of R3.16bn

By Dineo Faku for IOL

Blue Label yesterday notified its shareholders that troubled Cell C had defaulted on its loans.

The JSE-listed telecoms group, which holds 45% of Cell C, said the country’s third-largest mobile telecoms provider had failed to make payments of capital on its $184million (R3.16billion) note, which was due on Sunday, and interest and capital repayments related to the respective bilateral loan facilities between Cell C and Nedbank, the China Development Bank Corporation, the Development Bank of Southern Africa and the Industrial and Commercial Bank of China, which were due in January and last month.

Blue Label said note holders were aware that Cell C was working on its liquidity crisis.

“Currently, none of the bilateral loan facilities has been accelerated, as note holders are aware, and support that Cell C is committed to resolving the situation by agreeing to restructure terms with its lenders while it also continues to work pro-actively with all stakeholders to improve its liquidity, debt profile and long-term competitiveness,” said Blue Label.

Cell C said the loan defaults came as no surprise, because its informal debt was at a standstill until its recapitalisation programme was finalised.

“Cell C continues to work pro-actively with all stakeholders to improve its liquidity, debt profile and long-term competitiveness as part of its turnaround strategy,” the company said.

Cell C said its turnaround strategy was focused on ensuring operational efficiencies, restructuring its balance sheet, implementing a revised network strategy and improving overall liquidity.

“While a new recapitalisation is being negotiated, there is an informal debt standstill and debt payments have been suspended,” said the company.

It said that although Cell C’s lenders were entitled to call up the entire debt owed, they had not accelerated debt payments and had held off on taking action in order to facilitate a commercial solution.

“The non-payment is not a surprise to lenders that understand the Cell C turnaround strategy.”

The company said its S&P Global status on certain loan facilities and senior secured bonds remained unchanged at D (default).

Ofentse Dazela, director of pricing research at Africa Analysis, said the default showed that the company’s expanded roaming agreement with MTN, which was touted as some sort of panacea, had not yielded the intended results.

Dazela said the operator continued to navigate a challenging environment and questions about its sustainability were becoming more pronounced by the minute.

By Londiwe Buthelezi for Fin24

The Land Bank, which last week defaulted on some of its R738-million debt due to mature before the end of April, says it plans to approach its funders to negotiate waiving its current and anticipated defaults, and ask them to help it deal with its liquidity problems instead.

The state-owned lender, which funds emerging, and commercial farmers, said on Monday it is approaching stakeholders to raise up to R5 billion to meet its medium-term liquidity requirements.

“The Land Bank does not have sufficient liquidity to enable the Land Bank to meet its short-term interest and capital repayments across all its funders unless the Land Bank is able to secure sufficient bridge funding. Certain funders have or will be approached to participate in the provision of bridge funding to the Land Bank,” it said in a statement.

This comes after the struggling bank failed to prevent a default on certain of its debt obligations last Thursday, which triggered a cross default on other bonds.

On Monday, the state lender said that in order to continue with its operations, it will ask its funders to defer for one year all the debt repayment and interest that is due within the next six months. It will also ask them to waive current defaults and anticipated defaults for debt due within that six months period.

The bank said it has asked the commercial bank with the largest exposure to it to coordinate all the commercial banks it owes into a group. It has also asked the Association for Savings and Investments SA to coordinate bond notes holders.

Bloomberg reported on Friday that funders of the agricultural bank were willing to help the state-owned lender recover from the loan default if government gives a commitment to pitch in too.

National Treasury, meanwhile, said last Monday it was considering recapitalization and further guarantees for the bank.

“Assistance in the form of recapitalisation and further guarantees is under consideration and would have to be accompanied by balance sheet optimisation of the Land Bank to correct the structural liquidity risk embedded in the balance sheet,” said Treasury in response to Fin24’s questions on April 20.

By Jan Cronje for Fin24

Mobile operator Cell C has defaulted on an interest payment on a $184m loan (about R2.7bn at current exchange rates) which was due in December 2019, according to a notice from its key shareholder Blue Label Telecoms Limited.

In a statement to shareholders on Tuesday, Blue Label said Cell C had also defaulted on interest and capital repayments related to the respective bilateral loan facilities between Cell C and Nedbank Limited, China Development Bank Corporation, Development Bank of Southern Africa Limited and Industrial and Commercial Bank of China Limited, which were due in January 2020.

Blue Label’s share price plunged by almost 12%.

“Currently, none of the bilateral loan facilities have been accelerated as noteholders are aware and support that Cell C is committed to resolving the situation by agreeing to restructuring terms with its lenders while it also continues to work proactively with all stakeholders to improve its liquidity, debt profile and long-term competitiveness,” Blue Label said.

In a brief separate media statement, Cell C said that the suspension of payments was part of wider Cell C initiatives to “improve liquidity and to restructure the company’s balance sheet”.

“Cell C continues to work proactively with all stakeholders to improve its liquidity, debt profile and long-term competitiveness as part of its turnaround strategy,” it said.

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