S&P Global retains its Eskom rating
The ratings agency's stance suggests that it supports government debt relief
Credit ratings agency S&P Global Ratings said on Monday that its rating of Eskom debt remained unchanged in the light of recent developments, which include a plan for Eskom to restructure its debt and renewed operational difficulties.
Like other ratings agencies, S&P has Eskom debt deep in junk territory, at four notches below investment grade, with a negative outlook. S&P said that it would consider reviewing its outlook if government support was considered “adequate”, suggesting that it would view a government bail out in a favourable light.
The Eskom board and management met with ratings agencies last week briefing them on a plan to request government to take over R100bn of debt, to cut jobs and to enhance revenue.
“Our current rating on Eskom incorporates our view that the company remains at risk of not securing sufficient liquidity to meet all funding requirements in the next six months," it said in a statement.
“Additionally, our rating assessment takes into consideration that although we believe that Eskom will benefit from some government support, we consider that the predictability and timeliness of such support has been insufficient, given the acuteness of Eskom's ongoing funding challenges.”
However, the treasury is yet to be presented with the debt swop plan, which would involve government taking R100bn of Eskom’s R419bn debt onto its own balance sheet.
S&P said it viewed the engagement between Eskom and public enterprises minister Pravin Gordhan on the plan to save Eskom as “broadly constructive”.
However, it will await the full details of the “remediation strategy”, which is said it expected by be communicated in the first quarter of 2019.