ESLA Plc has announced an exchange offer for swapping GH¢1.2billion of Tranche E1 bonds due in October 2024 for Tranche E3 bonds due June 2029.
Essentially, this exchange offer will restructure the maturity profile of the outstanding bonds by converting either the whole or part of the 2024 maturity into a 2029 maturity. It means there will be no need to wait for the 2024 bonds to mature before rolling into the Tranche E3 bonds due in 2029.
Per the notice issued to investors last Friday, ESLA is targetting a minimum of GH¢100million and up to GH¢1.2billion of Tranche E1 bonds to be switched into Tranche E3 Bonds under the GH¢10billion bond programme.
The offer was opened to investors on Friday, August 27, 2021, and will close on Monday, August 30, 2021 with a settlement being reached the following day.
“Strictly speaking, they’re not buying back 2024 maturity with cash (as government would typically do). They are offering investors an existing bond with a longer tenor on the market and taking the equivalent amount of the 2024 bond from investors. So, they’re exchanging one bond for the other. That’s why it’s called an exchange offer,” Courage Kingsley Martey, an economist with Databank, said in an interview with B&FT.
Energy Sector Debt
A report from the Finance Ministry shows that as of the end of 2020 energy sector debt in excess of GH¢8billion had been refinanced through the ESLA over the last four years, in the form of debt swaps and cash payments to creditors.
Following issuance of the ESLA bonds, state-owned enterprise (SOE) debts were novated to E.S.L.A. PLC at the end of 2020. Of the total amount of approximately GH¢8.06billion, GH¢1.87billion was settled in cash to creditors while the remaining GH¢6.19billion was covered by debt swaps.
Under the novation agreement, the Issuer (ESLA Plc) became responsible for repayment of the relevant portion of energy sector debt to the relevant creditors. However, where a creditor opts for the energy debt cash payment, ESLA pays directly through the bond proceeds utilisation account bank with the net proceeds of the relevant tranche. But in cases where the creditor opts for the energy debt swap, it enters into a bond purchase agreement with the issuer and is issued with the relevant number and amount of bonds.
In 2018, a total of GH¢5.45billion was novated to creditors, comprising of about GH¢3.92billion in debt-swaps and GH¢1.53billion in cash settlement; while in 2019 GH¢988.78million was settled, with GH¢648.93million in debt-swaps and GH¢339.85million in cash settlements. Last year, ESLA novated about GH¢1.62billion entirely in debt-swaps.
As part of reforms in the energy sector, E.S.L.A PLC was established as a Special Purpose Vehicle (SPV) to issue long-term bonds backed by ESLA receivables to resolve energy sector debts of almost GH¢10billion owed to banks and trade creditors. A cumulative amount of GH¢5.03billion transferred to E.S.L.A. PLC, from the levies realised was partly utilised to meet the required coupon payments to bondholders.