Weak liquidity management and a high refinancing risk have been cited by New York investor service, Moody’s, as the reason why it will be reviewing the credit rating of South Africa’s state-owned logistics company (SOC), Transnet.
According to News23Wire, Transnet has only US$1.3 billion on its balance sheet but has $23.5 billion in bond maturations to pay out between now and March 2023.
The first of these maturations, for $1billion, is due next month.
Transnet is confident of restoring the cash-out that July’s bond maturation will have on its financial standing through the issuance of another bond, but Moody’s has expressed serious reservations about such a large bond offer.
Current market conditions, it says, could prove detrimental to Transnet’s chances of redeeming next month’s bond pay-out through issuing another.
It’s reported, though, that the parastatal is confident it can raise a substantial amount of cash through strong lenders, with strong government support in tow.
All things considered, it’s unlikely that Transnet will default on the July 28 bond maturation.
And yet concerns remain that the parastatal is not on track to healthier balance sheets.
Flaws in the SOC’s financial status apparently include delays in making audited statements public, the failure to obtain audited opinion, and “recurring breaches of debt covenants”.
Moody’s added that it didn’t believe Transnet would be in a position to recover revenue, profit and cash by the end of the next financial year, and that, in fact, it would take another two to three years to get to operational levels it had prior to the coronavirus outbreak of January 2020.
The agency cited several other reasons why it could downwardly adjust the parastatal’s credit rating.
The inability to honour contractual commitments with bulk freight commodity exporters was listed as one of the primary reasons Moody’s was considering a downgrade of Transnet’s bond repayment status.
