Moody’s rating affects Transnet’s investment plans

Transnet’s ability to raise finance for the billions it plans to invest on upgrading South Africa’s rail and port network has been weakened by the downgrading of its rating from stable to negative by Moody’s. This follows the downgrading of South Africa’s government debt ratings to negative from stable, reflecting heightened political risk in the context of more constrained public finances,” according to the agency. In a conflicting message, earlier in November, Standard & Poor’s (S&P’s) reaffirmed Transnet’s investment grade credit rating based on the company’s stand-alone credit profile. Transnet said the affirmation would enable the group to continue raising funds in the debt capital markets on the strength of its balance sheet and crucially, without guarantees from the government. In August, the Fitch Ratings affirmed Transnet’s national long-term rating at AA-(zaf) with a stable outlook. Moody’s says its decision to change the outlook on Transnet’s ratings to negative “was driven primarily by the change in outlook on South Africa’s government bond ratings, but also by the overall execution risk of its significant capex programme over the next five years, as well as the potential pressure to accelerate its current capital expenditure programme”. On a more positive note, it adds “in the past years, though, Transnet has successfully implemented over 90% of its budgeted capital investment programme”.