Moody’s Investors Service has downgraded the South African National Roads Agency’s (Sanral’s) credit ratings once again, citing growing cash-flow pressures arising from e-toll delays.In addition to the downgrade, Moody’s has put Sanral’s ratings on review for further downgrade.

Moody’s downgraded Sanral’s long-term issuer ratings to Baa3 (global scale, local and foreign currency) and to A3.za (South African national scale), from Baa2 and A2.za, citing the company’s intensifying cash-flow pressures.

“The decision to downgrade Sanral’s rating is driven by the significant deterioration in the company’s cash flows, which are necessary to meet its operating expenses and to service its very high debt levels acquired to fund the Gauteng Freeway Improvement Project (GFIP),” says a statement issued by Moody’s.

This cash-flow strain has arisen from the prolonged delay in the realisation of e-toll revenue earmarked to repay GFIP-related debt, and casts doubt on the company’s financial health in the medium term. Moody’s noted that Sanral had acquired about R20billion in debt over the past five years to finance the GFIP, of which about half was guaranteed by the South African government, which it rates Baa1 negative.

Sanral’s debt stock substantially increased to an estimated R36.2billion as at March 31 2013, up from R6.2 billion in 2007, mainly due to GFIP explains the statement, noting that further borrowing was expected, and Sanral’s debt stock would total R39billion by the end of the 2014 financial year.

Whilst Sanral has R15billion available in its guarantee from the South African government to issue more debt to meet its operating requirements for the next few months, including redeeming the R2billion scheduled for October 31 2013, additional debt issuance will further increase its already high finance charges and will put more pressure on Sanral’s finances, even with the anticipated realisation of e-toll revenues as budgeted by Sanral for the periods 2013-14 to 2015-16.