Standard & Poor’s have agreed that: “Exxaro Resources enjoys a broadly stable balance sheet despite increasing capital expenditures, and the company is able to maintain adequate liquidity.”
However, it has affirmed its short-term national scale rating following similar action on Eskom Holdings which was downgraded on 6 April 2017.
Following downgrade of the South African Sovereign, Eskom was downgraded to ‘B+’ from ‘BB-‘and to ‘zaBB-‘ from ‘zaBB+’.
Standard & Poor’s Global Ratings have, as a result, taken the following rating actions on Exxaro Resources: to lower its long term South African national scale rating to ‘zaBB-’ from ‘zaBB+’ and affirmed its short-term national scale ratings at ‘zaB’.
Despite this positive outlook, it is the decided opinion of Standard & Poor’s that the strengths are offset by the vulnerabilities of Exxaro Resources’ cash flows to Eskom credit quality, as well as, concentrated customer profile.
Exxaro Resources’ unsecured bonds on which this ratings downgrade has bearing, represents less than 15% of current Exxaro Resources loan facilities.
Despite the ratings downgrade Exxaro Resources continues to have a strong balance sheet with low gearing levels and sufficient sources of short-term and long-term liquidity.