The decision was driven by the deterioration in the company’s cash flow, Moody’s said in a statement.
“This cash-flow strain has arisen from the prolonged delay in the realisation of e-toll revenue earmarked to repay Gauteng Freeway Improvement Project (GFIP) related debt, and casts doubt on the company’s financial health in the medium term,” it said.
Moody’s downgraded Sanral’s long-term issuer ratings to Baa3 (global scale, local and foreign currency) from Baa2, and to A3.za (South African national scale) from A2.za.
In the past five years, Sanral has acquired debt of R20 billion to finance the GFIP. Fifty percent of the debt was guaranteed by the government.
“Sanral’s debt stock has substantially increased to an estimated R36.2bn as at 31 March 2013, up from R6.2bn in 2007, mainly due to GFIP,” Moody’s said.
“Moreover, further borrowings are anticipated in the interim, with the entity’s debt stock projected to total R39bn in 2014.”
Sanral’s inability to implement e-tolls, with further tensions in cash flows accompanied by heavy reliance on debt as a substitute to cover operating costs, would exert downward rating pressure.
The Opposition to Urban Tolling Alliance said it was concerned about the downgrade, but was not surprised.
“Sanral’s inability to launch e-tolling on five attempts over the past three years has highlighted the serious nature of the myriad of issues at stake for this most ambitious plan,” said Outa chairman Wayne Duvenage.
Comment could not be obtained from Sanral.