Moody’s downgrades Eskom, bonds to Ba2

Moody's Investors Service said it downgraded Eskom Holdings SOC Ltd.’s long-term corporate family rating to Ba2 from Ba1 and the zero coupon eurobonds to Ba2 from Ba1, in line with the corporate family rating.

Concurrently, the agency downgraded the global medium-term note program and the senior unsecured programs of Eskom to provisional Ba3/Ba3 from provisional Ba1/Ba1.

The probability of default rating was downgraded to Ba2-PD from Ba1-PD. The national scale rating long-term corporate family rating of A2.za was confirmed.

The outlook is negative. The action concludes the review for downgrade that was initiated on April 5.

The action reflects the weakening of the sovereign rating's credit profile as reflected in the recent decision to downgrade South Africa's government bond ratings to Baa3 from Baa2, negative.

Moody’s said the ratings are primarily driven by its assumption of a high level of potential government support in case of financial distress. Given Eskom's strong linkage with the South African government and its high sensitivity to changes in the sovereign credit profile, the downgrades primarily reflect the one-notch downgrade of South Africa's ratings to Baa3 negative on June 9.

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