Moody's warns of threat to Transnet ratings as government offers guarantees

MOODY'S Ratings has warned that Transnet's ratings will remain under review for downgrade until the South African government completes the process to allocate additional guarantees by the end of July.

- SIPHELELE DLUDLA

This comes after the government announced on Thursday last week that it had entered a process to allocate additional guarantees to allow the State-owned freight and logistics company to cover at least all debt redemptions over the next five years and enable it to fund its capital expenditure program.

The Minister of Transport, with the concurrence of the Minister of Finance, approved a R51 billion guarantee facility for Transnet’s capital investment programme and debt obligations.

The facility will enable Transnet to refinance maturing debt and ensure the organisation’s continued access to adequate resources and facilities to be able to continue its operations as well as fund the capital investment programme for the foreseeable future, while also enabling Transnet to focus on operational improvements and strategic reforms.

The formalized R51bn guarantee facility has been structured to cover R41bn in funding needs that Transnet expects through the end of financial year 2027, along with R10bn in guarantees for liquidity facilities.

Moody’s on Thursday said it viewed the significant support measures as strengthening the financial stability of Transnet.