Without revenue, Sanral faces ruin by October 2013

This is notwithstanding Sanral's current strong cash reserves of R7.1-billion which should absorb operating costs‚ including debt service in the short-term‚ the rating agency said in its annual report on the roads agency.

It said that Sanral's Baa2/A2.za and Prime -3/Prime -2.za global scale (local and foreign currency)/national scale issuer ratings (negative outlook) were underpinned by its close financial and operational linkages with the South African government‚ and Sanral's good historical financial management.

"Notwithstanding its current strong cash reserves of R7.1-billion which should absorb operating costs‚ including debt service in the short-term‚ Sanral will experience significant financial pressure post October 2013 in the event that e-toll revenues are still not earned by the entity‚" said Kenneth Morare‚ Moody's lead analyst for Sanral.

Moody's noted that‚ as a consequence of the financial injection of R5.8-billion received recently from the national treasury‚ Sanral's liquidity profile had increased to 1.5x in 2012 (preliminary results)‚ from 1.2x in 2011.

The credit rating agency further noted that Sanral had incurred R20-billion in debt (of which approximately 57% is guaranteed by the South African government) to finance the Gauteng Freeway Improvement Project (GFIP) project and that the e-toll revenues were essential to it servicing this debt and absorbing the concomitant operating costs.

The GFIP was responsible for most of the rapid increase in Sanral's debt stock to its current level of R37.5-billion‚ or a high 5x its 2012 annual revenues.

"We believe that Sanral's high gearing and uncertainties over e-tolling issues could make it difficult for the company in medium-term to debt-finance the operating deficits resulting from its loss of e-toll revenue" added Morare.

Sanral is a public company‚ wholly owned by the Republic of South Africa‚ with the transport minister representing the government as the sole shareholder. The company remains a key strategic asset to the central government which has determined Sanral's mandate to develop and maintain the national road infrastructure in South Africa. – I-Net Bridge

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