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Fitch downgrades Eskom‚ Transnet

Jan 11 2013 19:40 Fin24

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Cape Town  - Credit rating agency Fitch made adjustments on Friday to the ratings and outlooks of the country’s two most significant state-owned enterprises, Eskom and Transnet.

It has downgraded Eskom and Transnet after cutting the country's sovereign debt, citing deteriorating economic growth that risks social and political tensions.

Fitch said Eskom and Transnet's ratings remain linked to those of the country's sovereign debt.

It lowered its outlook on Eskom's long-term local currency IDR to 'BBB+' from 'A' with a stable outlook. It also dropped its senior unsecured local currency to 'BBB+' from 'A'.

Along with other cuts, Transnet's long-term local currency IDR was downgraded to 'BBB-' from 'BBB+' with a stable outlook, while its local currency senior unsecured rating also fell to to 'BBB-' from 'BBB+'.

"Fitch's assessment of these issuers' legal‚ operational and strategic ties with the state in accordance with the agency's 'Parent and Subsidiary Rating Linkage' criteria‚ and the agency's assessment of the critical role of these issuers in the South African economy", the agency said in a statement.

The rating actions follow the downgrade of the country from BBB+ (negative) to BBB (stable). The long-term local rating was downgraded by two notches from A to BBB+. 

"The South African government is consistently making efforts to address the concerns identified in Fitch's rating review which is aimed at mitigating growth and socio-economic concerns," the Treasury said in a statement responding to the country's downgrade on Thursday.

The Treasury said the downgrade had its roots in economic troubles facing the Eurozone, one of South Africa's major trading partners.

Rating agencies Standard and Poor's (S&P) and Moody's have already downgraded several large companies, including parastatals Eskom and Transnet last year.

"Although Eskom's credit rating remains investment grade, with the support of government, the recent downgrades by Moody's and Standard & Poor's are a concern", Eskom said at the time.


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