Fitch might cut Eskom

Fitch Ratings said it placed Eskom Holdings SOC Ltd.'s long-term local currency issuer default ratings and unguaranteed local currency senior unsecured ratings of BB+ on rating watch negative.

The agency also affirmed the government-guaranteed local currency senior unsecured debt ratings at BB+.

In addition, Fitch placed the national long-term rating of AAA(zaf) and the national short-term rating of F1+(zaf) on negative watch.

Fitch said the negative watch reflects its intention to reassess the strengths of Eskom's links with the government of South Africa (BB+/Stable) due to Eskom's weakening liquidity and funding access partially stemming from unresolved corporate governance issues, weak cash flows driven by lower-than-expected tariff increases due to delays in implementing outstanding regulatory clearing account applications.

The Guarantee Framework Agreement continues to support the company's ratings overall and in particular the affirmation of the guaranteed debt rating, the agency noted.

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