South Africa S&P now rates Eskom four notches into junk territory

Eskom had its credit rating moved deeper into junk territory by S&P Global Ratings on Thursday night.

S&P said it now rated Eskom as B+, four notches below investment grade. This drops the power utility into the "highly speculative" band from "noninvestment grade".

The ratings agency said it was prompted to cut Eskom to B+ from BB-because the state-owned enterprise’s (SOE’s) ability to service its enormous debt was heavily dependent on government backing.

 

 

S&P questioned the South African government’s ability to stand surety for all the guarantees it had provided to its loss-making SOEs when it cut the country’s sovereign rating to BB+ from BBB-on Monday.
Eskom issued a statement on Friday morning claiming its plummeting creditworthiness would not hamper its ability to raise funds.

"In line with the execution of our funding plan, 72% of the current fiscal year’s funding amounting to R72bn will be secured by end-April, thus the funding requirement for the 2018 financial year is not compromised," Eskom chief financial officer Anoj Singh said in the statement.
"We are confident that we will successfully execute Eskom’s funding plan over the next five years backed by the availability of the government guarantees; the only challenge that Eskom will have to contend with will be the higher cost of debt."

@BDlive SA