Moody's reaffirms Sanral's stable outlook

Moody's Investor Services has reaffirmed its rating outlook of the South African National Roads Agency (Sanral) as "stable".

In June, Moody's altered its rating outlook from negative to stable, largely as a result of the progress Sanral had made in restoring investor confidence and its e-tolling collections successes.

"It is gratifying that in the intervening five months, Moody's has identified these and related factors as sufficiently positive to maintain its previous ratings," says Sanral's CFO, Inge Mulder.

Moody's has also affirmed its issuer ratings for Sanral of Baa3 (global scale, local and foreign currency) and A3.za (South African national scale).

The ratings are further supported by several other factors, among them:

* The South African government's guarantee of 60% of the company's debt; * Sanral's traditionally prudent financial management; and * Credit strength underlined by Sanral's state ownership and public-policy mandate, along with its close integration with the central government.

On the likelihood of a rating upgrade, Moody's considers this would require evidence of Sanral's capacity to consolidate toll revenue collections. "A structural improvement in the company's financial position leading to lower-than-anticipated borrowing needs could also exert upward pressure on the ratings."

Moody's considers Sanral's limited track record of e-toll collection as mitigated by a supportive legal framework.

It notes that the R678 million collected on e-tolls in the six months to May 2014 was "well above projections", though the momentum was unlikely to be maintained for the rest of 2014.

Even so, Moody's takes comfort from the Transport and Related Matters Amendment Bill of September 2013, which provides Sanral with the necessary legislative instruments to enforce e-toll payments.

Against the background of the huge capital expenditure requirements for the maintenance of the existing toll road network, Moody's is encouraged by Sanral's commitment to prudently manage the execution of its capital programme and to "adjust expenditure according to budgetary resources and borrowing plans".