Moody’s downgrades Eskom due to poor governance and the Guptas
Moody’s downgraded Eskom to its third rung of junk on Wednesday, while S&P Global Ratings cut the creditworthiness of the state-owned power utility by two notches to B- from B+.
Moody’s cut Eskom’s credit rating to Ba3 (equivalent to BB- in S&P’s and Fitch’s nomenclature) from Ba2, with an outlook of "review for further downgrade".
A further downgrade for Eskom would mean falling into the "highly speculative" band from the "non-investment grade" band.
"Today’s rating action on Eskom reflects Moody’s view that the stand-alone credit strength of the company has weakened as a result of its deteriorating liquidity position and poor corporate governance in the context of a more volatile funding environment; and that the likelihood of timely government support may have [been] reduced," the ratings agency said.
Moody’s said that though Eskom had managed to borrow more than half the money it needs for its year to end-March 2018, it still needed to borrow a further R24bn.
The note said: "Access to the capital market and other funding sources has been restricted by investor and lender concerns as to Eskom’s poor corporate governance and ties to the Gupta family against a background of a potentially weaker sovereign, as reflected in Moody’s current review of SA’s rating."