However, despite lifting the review, Moody’s changed Transnet’s outlook from ratings under review to negative, saying that an upgrade was unlikely at this time. Picture: Reuters
Transnet has vowed to improve its operational performance amid a challenging environment following encouraging ratings action by Moody’s Investor Services.
The state-owned freight and rail logistics company on Friday confirmed that Moody’s had lifted the review for downgrade it had placed on Transnet earlier this year.
In June, Moody’s placed all of Transnet’s ratings on review for downgrade because it had become increasingly concerned over the company’s exposure to weak liquidity management and high refinancing risk.
However, despite lifting the review, Moody’s changed Transnet’s outlook from ratings under review to negative, saying that an upgrade was unlikely at this time.
Transnet Group treasurer Andre Pillay on Friday said this ratings action was a confirmation of the company’s improved liquidity position.
“Transnet is encouraged by the ratings action Moody’s has taken as it allows the company the space to focus on its operational performance, improve its liquidity and mitigate possible debt refinancing risks,” Pillay said.
“The operating environment remains challenging, however, (with) actions that are in progress to deal with the binding constraints including the agreements that are being finalised with Original Equipment Manufacturer (OEM), Transnet expects operational performance to improve.”
Transnet in July reported a R5 billion profit for the 2021/22 financial year and its first unqualified audit in four years due to improvements in earnings and a decrease in asset impairments.
In its statement, Moody’s said Transnet’s ratings were confirmed because the company's liquidity had improved after it raised new financing in the form of a $685 million (R11.8bn) five-year amortising term loan and a bridge to bond facility that allowed it to repay its $1bn international bond maturity on July 26.
It said the outlook was changed to negative because the company’s liquidity profile remains under pressure, albeit not as acute as before the new financings were raised.
Moody’s senior credit officer, Raffaella Altamura, said they would consider stabilising the outlook at the current rating level if Transnet secures long-term financing to replace the short-term bridge loan that was used to redeem a $1bn bond maturity in July.
“Transnet remains reliant on accessing debt capital markets to refinance the bridge facility and other maturing debt within the next 12 months,” Altamura said.
“Given ongoing volatile market conditions, Moody’s expects that it will be challenging to access capital markets within a narrow time frame.
“Moody’s, however, also continues to believe that strong support from the South African government exists in case it would be required.”
Meanwhile, Transnet Port Terminals on Friday lifted with immediate effect the force majeure it declared in the automotive, bulk and multi-purpose terminals after two weeks due to a workers’ strike.
The company is implementing recovery plans to stabilise operational performance and efficiencies across its terminals, as the strike crippled all movement of cargo at the ports.
However, Transnet said the force majeure declared in the container terminals would remain in place and might be lifted by the end of the month due to the extent of the backlogs.
“At the ports, focus remains on clearing the backlog of vessels at anchorage and alongside the quay, including bulk, break bulk and containers,” said spokesperson Ayanda Shezi.
“Evacuation of imports out of the port is underway, in order to create fluidity within the terminals, with the immediate focus being on perishable and time-sensitive cargo.”
Before the strike, Transnet’s Durban Car Terminal set a new record of car units handled in a single month, recording 72 684 fully built units (FBU) at the end of September.
This was the highest monthly volume since the inception of terminal operations, far surpassing the previous record of 60 994 FBU handled in one month set in August 2019.
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