Moody’s Investors Service has placed Transnet on review for a potential credit ratings downgrade due to concerns over liquidity and refinancing risks for the struggling state-owned freight, port and logistics group.

"Moody's views weakened liquidity as a governance-related risk. After the resignation of the company's former CEO and CFO in October, Transnet also remains without a permanent top management team, which further weakens governance, although the appointment processes for these two critical positions have commenced," the ratings agency said in a statement last week.

"Moody's understands the company is working on several new financing initiatives but believes it will become increasingly difficult to access new financing without government support."

Transnet is debt-distressed and unable to service its over R130-billion of debt from its own revenue. Around R7-billion of bonds issued under its domestic medium-term note programme fell due for repayment last week. While Transnet issued short-term commercial paper to the Public Investment Corporation (PIC) to effectively roll over R4.4-billion of its debt due, it appears to have settled the balance with the PIC and other lenders through available cash.

The short maturity date of only four months for the R4.4-billion is also an indication that the Treasury, which opted not to provide Transnet with any assistance in the medium-term budget policy statement, will have to step in in next year's budget. Finance Minister Enoch Godongwana recently said that the Treasury would not be stepping in with debt support for Transnet until it has reviewed a turnaround plan.

The ratings agency expected Transnet to still benefit from a degree of government support.

"However, there has been no tangible support framework announced thus far, and the uncertainty around the materiality and timeliness of the support has heightened liquidity and refinancing risk for Transnet."

Moody’s said Transnet has additional debt maturities of around R10-billion from December 2023 to March 2024, including the amount rolled over by the PIC.

"Moody's expects existing sources of liquidity will only marginally cover these maturities and therefore the company is dependent on raising new financing in short order. The company also has a concentrated maturity profile in the following years with a total of R96-billion of debt maturing until March 2028."