Moody's downgrades Transnet

Moody's Investors Service said it downgraded Transnet SOC Ltd.'s senior long-term ratings to Baa2 from Baa1, lowered its baseline credit assessment to baa2 from baa1 and changed the outlook to stable from negative.

The rating action primarily reflects Moody's expectation of a weaker South African macroeconomic environment, as reflected by its downward revision of the South African (Baa2/stable) gross domestic product growth to between 1.5% and 2.0% from a range of 2.0% to 3.0% for 2015, which the agency said will pressure Transnet's credit metrics as it pursues its ZAR 306 billion counter-cyclical investment program for the next seven years.

However, Moody's said it recognizes that Transnet will continue to demonstrate positive growth trends (volumes and price increases), operational efficiency gains and continued cost containment albeit at a slower rate than the agency’s original expectations for the Baa1 rating.

The affirmation of the national scale ratings recognizes Transnet's stronger credit profile within the Baa2 rating and relative to its South African national scale peer group, the agency said.

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