Transnet has projected confidence in its ability to raise funding and meet its upcoming debt obligations, brushing aside a dire warning by Moody’s Ratings that the freight and rail group is set to run out of cash in three months’ time.
“Transnet remains confident that it will — in line with its funding plan — be in a position to approach the market to raise the required funding to meet its operational requirements and debt obligations for the rest of the year,” it said.
“The company will continue to focus on operational improvements supported by the appropriate levels of capital investment in order to achieve its targets.”
Transnet’s comments in an emailed reply to Business Day questions came after Moody’s put its rating on review for downgrade, citing its “growing concern over the company’s unsustainable capital structure and its deteriorating liquidity” position and placing its lopsided capital structure under sharper scrutiny.
Moody’s analysis casts doubt on Transnet’s ability to meet its obligations without intervention as it acknowledged that the parastatal still had R7bn in undrawn loans and remaining cash reserves from the end of March 2025.
“We expect this amount of available liquidity sources will only be sufficient to reliably cover the company’s operating and investing needs, as well as upcoming debt maturities, for the next three months,” the agency said.
“We believe the company requires additional government support to refinance upcoming debt maturities and secure funds for its expanded capex [capital expenditure] programme.”
Transnet faces debt amortisation payments, with the next substantial maturity comprising a R9.9bn local bond due in August, Moody’s said.
Futuregrowth, one of Transnet’s bondholders, called on the state, as the sole shareholder of Transnet, to sort out the capital structure of the company instead of giving it further government guarantees that ensnare it in further debt.
Futuregrowth expressed worries that additional government guarantees do not solve the underlying problem of a dangerously debt-laden capital structure, saying the cost of this funding and further degradation of Transnet capital structure makes them suboptimal mechanisms.
“We believe that a proper consideration of Transnet’s gearing and cash flows needs to be made, with consideration being given to a possible equity injection to return Transnet’s capital structure to more sustainable gearing levels,” said Olga Constantatos, head of credit at the Old Mutual-owned fixed-income group.
“This should provide Transnet with the cash flows and breathing room to continue their operational turnaround interventions, undertake the necessary maintenance and provide some capital for additional investment in the key rail and ports sector,” she said.
“Without a proper solution to address the underlying overgeared balance sheet, there is a risk that some or all of the green shoots of Transnet’s operational turnaround, and the additional cash flows generated from this, will be used up to service the growing debt burden.”
Constantatos said the state must avoid an Eskom recurrence, where the power producer received a plethora of government guarantees that led to it growing unsustainable debt backed by the guarantees.
Moody’s rating action is in line with that of S&P Global, which in December also put the state-owned group on credit watch.
S&P expects Transnet’s debt pile to breach the R150bn mark by year end. The agency warned of an increased likelihood of a downgrade if the expected turnaround “in business performance and cash flow generation does not materialise soon enough to control the current leverage levels and capital structure”.
Finance minister Enoch Godongwana would later tell legislators that the government was able to persuade S&P to change its mind on downgrading Transnet after talks with the agency.
Godongwana has opened the door for additional guarantees to “refinance the entity’s maturing debt as well as its capital investment programme”. He said should Transnet require gap funding for its private sector participation projects, the budget facility for infrastructure would consider these.
Transport minister Barbara Creecy has been ramping up private sector participation in SA’s logistics sector.
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