The South African National Roads Agency’s (SANRAL) investment grade rating now sits just one notch above junk. This came after international ratings agency Moody’s affirmed SANRAL’s rating last week.

Moody’s indicated that it gave SANRAL  a negative outlook as it was battling to collect its outstanding e-toll income. The agency said that the outstanding amount was currently R7.66 billion.

The ratings agency put SANRAL’s rating under review earlier this year, on September 14, and it was then that it highlighted the challenges SANRAL faced. Some of these included uncertainty over whether it would continue to access debt owed to the company from e-toll receipts.

“While e-toll collection rates have not improved, Moody’s confirmation of the ratings follows SANRAL’s successful R2.5 billion debt issuance in September and October,” Moody’s said. “The funds raised decreases short-term concern on SANRAL’s cash flow.”

Moody’s said that while this did not “resolve the ongoing concern of SANRAL’s inability to raise sufficient revenue through e-tolls and subsequent reliance on increasing debt, which is reflected in the current ratings and negative outlook, it does provide for near-term security of bondholders.”

What could have been done to avert a downgrade

Moody’s indicated that it was also concerned about government’s decision on SANRAL’s application to extend its borrowing limit under guaranteed debt. “SANRAL’s rating could be confirmed if national government approves its application to extend the guarantee and the company is able to tap the market to finance its funding requirements,” Moody’s said in a previous statement.

“Any successful enforcement of e-toll collections that may lead to an improvement in cash flows would also support the rating,” it added.

The decision which was initially expected at the end of November 2016 has been pushed to the first quarter of next year 2017.