Following the exchange offer of swapping GH¢1.2billion of Tranche E1 bonds due in October 2024 for Tranche E3 bonds due June 2029, ESLA Plc intends to buy back a portion of the Tranche E1 bonds of GH¢200million.
According to a notice to bondholders, the proceeds in the Lock box account – meant for the receipt of overflows from the ESLA receivables account, the reserved proceeds amount, and the payments under the cash support agreements – will be used to buy back the Tranche E1 Bonds under the GH¢10billion Bond Programme. However, in the case of oversubscription the company will pro-rata the excesses.
The offer was opened to investors on Tuesday, August 31, 2021 and closed on Wednesday, September 1, 2021; and a settlement was reached on Friday, September 3, 2021.
As part of the energy sector reforms, ESLA 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.
Although there are other liability management processes issuers can use to reduce their outstanding indebtedness, bond repurchases or bond buy backs are advantageous for issuers that wish to capitalise relatively quickly on a depressed market price for their bonds.
Bond exchange offer
Yesterday, ESLA Plc settled an exchange offer that will restructure the maturity profile of the outstanding bonds by converting either the whole or part of the 2024 maturity into a 2029 maturity. The target was 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.
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 ESLA Plc at the end of 2020. From 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 is paid 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 to be issued with the relevant number and amount of bonds.