Moody's Investors Service’s new Transnet rating from negative to stable is not really good news, considering that the SOE is still in significant financial trouble and the better rating won't mean much for economic growth.📈
‘s ratings was changed to stable because the company’s liquidity improved after it announced that it successfully priced a new five-year $1-billion international bond that was issued on 6 February. Moody’s now considers Transnet’s liquidity as marginally adequate to cover upcoming debt maturities over the next 12 to 18 months, as well as planned capital expenditure.
However, Moody’s also noted that Transnet’s operational recovery remains slow. The stable outlook reflects Moody’s expectation that Transnet will continue to strengthen its liquidity profile, while operations will gradually recover to pre-Covid levels over the next two to three years. “Transnet itself confirmed in a request to Treasury that it needs R111 billion, of which R80 billion remains unfunded, to ‘restore operations’.”
At the same time, Transnet’s cashflows are so constrained that it breached its cash interest cover debt covenants at the September half-year results and needed lender waivers.
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