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Rating Action:

Moody's places on review for downgrade 15 South African sub-sovereigns

Global Credit Research - 28 Nov 2017

Johannesburg, November 28, 2017 -- Moody's Investors Service has today placed the global scale long-term ratings of 12 South African regional and local governments (RLGs) and three government-related entities (GRIs) under review for downgrade. City of Cape Town's, City of Ekurhuleni's and City of Johannesburg's global scale short-term issuer ratings of Prime-3, were also placed on review for downgrade. The long term and short term national scale ratings are not affected by this action.

Today's rating actions follow the potential weakening of the South African government's credit profile, as captured by Moody's recent decision to place South Africa's Baa3 government bond ratings on review for downgrade. For further information, refer to the sovereign press release "Moody's places South Africa's Baa3 ratings on review for downgrade" http://www.moodys.com/viewresearchdoc.aspx?docid=PR_375816.

A full list of affected ratings is provided towards the end of this press release.

RATINGS RATIONALE

RATIONALE FOR PLACING THE RATINGS OF 12 RLGs AND THREE GRIs ON REVIEW FOR DOWNGRADE

The decision to place the ratings of 12 regional and local governments and three government-related issuers on review for downgrade reflects the close operational and financial linkages between the national government and municipalities, illustrating the centralised nature of the local public sector. Large cities are exposed to the country's macroeconomic performance and socio-economic conditions to varying degrees, while small- to medium-sized municipalities are highly reliant on government transfers for operations and capital investments. While metropolitan cities rated by Moody's have comparatively rich economic bases, sound financials and good governance practices, they feature moderate-to-high debt levels, which add rigidity to their budgets.

Local municipalities are highly exposed to government transfers allocations. Moreover, volatile budget results, resulting from less sophisticated budget planning, are a major factor behind most of the ratings being lower than those of metropolitan cities.

Placing the ratings of East Rand Water Care Company (ERWAT) and City Power Johannesburg on review for downgrade mirrors changes in the credit profile of their respective parent municipalities, the Metropolitan Municipality of Ekurhuleni and the City of Johannesburg, respectively. Placing the ratings of South African National Roads Ag. Ltd (The) (SANRAL) on review for downgrade reflects the issuer's exposure to the potential weakening of the South African government's credit profile. SANRAL has the status of a public-sector entity, wholly owned by the Republic of South Africa, with the Ministry of Transport representing the government as the sole shareholder.

FOCUS OF THE REVIEW

The review will focus on the impact of the potential weakening of the South African government's credit profile, in particular in the country's institutional, economic and fiscal strength, for South African sub-sovereigns. The conclusion of the review will follow the conclusion of the review at the sovereign level.

WHAT COULD CHANGE THE RATINGS UP/DOWN

A further weakening of the South African sovereign credit profile could lead to downward adjustments in the ratings of RLGs and government-related companies. Additionally, financial difficulties resulting in cash-flow pressures and consistently high or growing debt levels could lead to downward rating actions independent of sovereign rating movements. Upward rating pressure to the ratings of RLGs and government-related companies could result from the strengthening of the sovereign credit profile. Evidence of a given entity's ability to display comparatively stronger credit fundamentals and an ability to withstand the deterioration of the operating environment could also exert upward rating pressure.

The principal methodology used in rating Amathole, District Municipality of, Bergrivier, Municipality of, Breede Valley, Municipality of, Cape Town, City of, Ekurhuleni, City of, Johannesburg, City of, Mangaung, Metropolitan Municipality, Mbombela, Municipality of, Nelson Mandela, Metropolitan Municipality, Rustenburg, Municipality of, Tshwane, City of, and uMhlathuze, City of was Regional and Local Governments published in June 2017.

The principal methodology used in rating City Power Johannesburg, East Rand Water Care Company and South African National Roads Ag. Ltd (The) was Government-Related Issuers published in August 2017.

Please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

LIST OF AFFECTED RATINGS

On Review for Downgrade:

..Issuer: City Power Johannesburg

....LT Issuer Rating, Placed on Review for Downgrade, currently Baa3

..Issuer: East Rand Water Care Company

...LT Issuer Rating, Placed on Review for Downgrade, currently Ba1

..Issuer: South African National Roads Ag. Ltd (The)

....LT Issuer Rating, Placed on Review for Downgrade, currently Ba1

..Issuer: Amathole, District Municipality of

....LT Issuer Rating, Placed on Review for Downgrade, currently Ba2

..Issuer: Bergrivier, Municipality of

....LT Issuer Rating, Placed on Review for Downgrade, currently Ba3

..Issuer: Breede Valley, Municipality of

....LT Issuer Rating, Placed on Review for Downgrade, currently Ba2

..Issuer: Cape Town, City of

....LT Issuer Rating, Placed on Review for Downgrade, currently Baa3

....ST Issuer Rating, Placed on Review for, Downgrade, currently P-3

....Senior Unsecured MTN Program, Placed on Review for Downgrade, currently (P)Baa3

....Senior Unsecured Regular Bond/Debenture, Placed on Review for Downgrade, currently Baa3

..Issuer: Ekurhuleni, City of

.... LT Issuer Rating, Placed on Review for Downgrade, currently Baa3

....ST Issuer Rating, Placed on Review for Downgrade, currently P-3

....Senior Unsecured MTN Program, Placed on Review for Downgrade, currently (P)Baa3

....Senior Unsecured Regular Bond/Debenture, Placed on Review for Downgrade, currently Baa3

..Issuer: Johannesburg, City of

....LT Issuer Rating, Placed on Review for Downgrade, currently Baa3

...ST Issuer Rating, Placed on Review for Downgrade, currently P-3

....Senior Unsecured MTN Program, Placed on Review for Downgrade, currently (P)Baa3

....Senior Unsecured Regular Bond/Debenture, Placed on Review for Downgrade, currently Baa3

..Issuer: Mangaung, Metropolitan Municipality

....LT Issuer Rating, Placed on Review for Downgrade, currently Ba2

..Issuer: Mbombela, Municipality of

....LT Issuer Rating , Placed on Review for Downgrade, currently Ba2

..Issuer: Nelson Mandela, Metropolitan Municipality

....LT Issuer Rating, Placed on Review for Downgrade, currently Baa3

..Issuer: Rustenburg, Municipality of

....LT Issuer Rating , Placed on Review for Downgrade, currently Ba2

..Issuer: Tshwane, City of

....LT Issuer Rating, Placed on Review for Downgrade, currently Ba2

..Issuer: uMhlathuze, City of

...LT Issuer Rating, Placed on Review for Downgrade, currently Ba2

Outlook Actions:

..Issuer: Amathole, District Municipality of

....Outlook, Changed To Rating Under Review From Negative

..Issuer: Bergrivier, Municipality of

....Outlook, Changed To Rating Under Review From Negative

..Issuer: Breede Valley, Municipality of

....Outlook, Changed To Rating Under Review From Negative

..Issuer: Cape Town, City of

....Outlook, Changed To Rating Under Review From Negative

..Issuer: Ekurhuleni, City of

....Outlook, Changed To Rating Under Review From Negative

..Issuer: Johannesburg, City of

....Outlook, Changed To Rating Under Review From Negative

..Issuer: Mangaung, Metropolitan Municipality

....Outlook, Changed To Rating Under Review From Negative

..Issuer: Mbombela, Municipality of

....Outlook, Changed To Rating Under Review From Negative

..Issuer: Nelson Mandela, Metropolitan Municipality

....Outlook, Changed To Rating Under Review From Negative

..Issuer: Rustenburg, Municipality of

....Outlook, Changed To Rating Under Review From Negative

..Issuer: Tshwane, City of

....Outlook, Changed To Rating Under Review From Negative

..Issuer: uMhlathuze, City of

....Outlook, Changed To Rating Under Review From Negative

..Issuer: City Power Johannesburg

....Outlook, Changed To Rating Under Review From Negative

..Issuer: East Rand Water Care Company

....Outlook, Changed To Rating Under Review From Negative

..Issuer: South African National Roads Ag. Ltd (The)

....Outlook, Changed To Rating Under Review From Negative

Glossary of Terms and Acronyms

Credit Rating: A Credit Rating is an opinion from Moody's Investors Service (MIS) regarding the creditworthiness of an entity, a debt or financial obligation, debt security, preferred share or other financial instrument, or of an issuer of such a debt or financial obligation, debt security, preferred share or other financial instrument, issued using an established and defined ranking system of rating categories.

Debt: Long term debt (including liability for capital leases) plus short term debt plus current portion of long term debt. May also be adjusted to include other long term obligations, such as leases and pensions.

Global Scale Long Term Credit Rating: Long-term ratings are assigned to issuers or obligations with an original maturity of one year or more and reflect both on the likelihood of a default on contractually promised payments and the expected financial loss suffered in the event of default.

Global Scale Ratings: Ratings assigned on Moody's global long-term and short-term rating scales are forward-looking opinions of the relative credit risks of financial obligations issued by non-financial corporates, financial institutions, structured finance vehicles, project finance vehicles, and public sector entities.

Global Scale Short Term Credit Rating: Short-term ratings are assigned to obligations with an original maturity of thirteen months or less and reflect the likelihood of a default on contractually promised payments.

GRI (Government-Related Issuer): GRI is an entity with full or partial government ownership or control, a special charter, or a public policy mandate from the national, regional or local government. Moody's generally uses 20% as the minimum government ownership level before considering an issuer to be a GRI.

Issuer Rating: Issuer Ratings are opinions of the ability of entities to honor senior unsecured financial counterparty obligations and contracts.

Rating Review: A rating review indicates that a rating is under consideration for a change in the near term. A rating can be placed on review for upgrade (UPG), downgrade (DNG), or more rarely with direction uncertain (UNC). A review may end with a rating being upgraded, downgraded, or confirmed without a change to the rating. Ratings on review are said to be on Moody's "Watchlist" or "On Watch".

For further information on these definitions or on Moody's ratings symbols, please consult the Rating Symbols and Definitions document on www.moodys.com.

REGULATORY DISCLOSURES

The rating for 823235132, LT Issuer Rating, ISSUER RATING, ZAR of City Power Johannesburg was initially assigned on 11 May 2016 and the last Credit Rating Action was taken on 12 Jun 2017.

The rating for 822471425, LT Issuer Rating, ISSUER RATING, ZAR of East Rand Water Care Company was initially assigned on 11 May 2016 and the last Credit Rating Action was taken on 12 Jun 2017.

The rating for 820031729, LT Issuer Rating, ISSUER RATING ZAR of South African National Roads Ag. Ltd (The) was initially assigned on 27 Aug 2009 and the last Credit Rating Action was taken on 12 Jun 2017.

The rating for 820031729, LT Issuer Rating, ISSUER RATING of South African National Roads Ag. Ltd (The) was initially assigned on 27 Aug 2009 and the last Credit Rating Action was taken on 12 Jun 2017.

The rating for 820596390, LT Issuer Rating, ISSUER RATING ZAR of Amathole, District Municipality of was initially assigned on 11 May 2016 and the last Credit Rating Action was taken on 12 Jun 2017.

The rating for 820596243, LT Issuer Rating, ISSUER RATING ZAR of Breede Valley, Municipality of was initially assigned on 11 May 2016 and the last Credit Rating Action was taken on 12 Jun 2017.

The rating for 823963938, LT Issuer Rating, ISSUER RATING of ZAR of Bergrivier, Municipality of was initially assigned on 11 May 2016 and the last Credit Rating Action was taken on 12 Jun 2017.

The rating for 820595946, LT Issuer Rating, ISSUER RATING ZAR of Cape Town, City was initially assigned on 11 May 2016 and the last Credit Rating Action was taken on 12 Jun 2017.

The rating for 820595946, ST Issuer Rating, ISSUER RATING ZAR of Cape Town, City of was initially assigned on 11 May 2016 and the last Credit Rating Action was taken on 12 Jun 2017.

The rating for ZAG000054982, LT Senior Unsecured, BOND, ZAR of Cape Town, City of was initially assigned on 11 May 2016 and the last Credit Rating Action was taken on 12 Jun 2017.

The rating for ZAG000068719, LT Senior Unsecured, BOND, ZAR of Cape Town, City of was initially assigned on 11 May 2016 and the last Credit Rating Action was taken on 12 Jun 2017.

The rating for ZAG000075995, LT Senior Unsecured, BOND, ZAR of Cape Town, City of was initially assigned on 11 May 2016 and the last Credit Rating Action was taken on 12 Jun 2017.

The rating for 820960280 LT Senior Unsecured MTN, ZAR of Cape Town, City of was initially assigned on 11 May 2016 and the last Credit Rating Action was taken on 12 Jun 2017.

The rating for 820595939, LT Issuer Rating, ISSUER RATING ZAR of Ekurhuleni, Metropolitan Municipality of was initially assigned on 11 May 2016 and the last Credit Rating Action was taken on 12 Jun 2017.

The rating for 820595939, ST Issuer Rating, ISSUER RATING ZAR of Ekurhuleni, Metropolitan Municipality of was initially assigned on 11 May 2016 and the last Credit Rating Action was taken on 12 Jun 2017.

The rating for ZAG000078916, LT Senior Unsecured, BOND, ZAR of Ekurhuleni, Metropolitan Municipality of was initially assigned on 11 May 2016 and the last Credit Rating Action was taken on 12 Jun 2017.

The rating for ZAG000084526, LT Senior Unsecured, BOND, ZAR of Ekurhuleni, Metropolitan Municipality of was initially assigned on 11 May 2016 and the last Credit Rating Action was taken on 12 Jun 2017.

The rating for ZAG000094848, LT Senior Unsecured, BOND, ZAR of Ekurhuleni, Metropolitan Municipality of was initially assigned on 11 May 2016 and the last Credit Rating Action was taken on 12 Jun 2017.

The rating for ZAG000105669, LT Senior Unsecured, BOND, ZAR of Ekurhuleni, Metropolitan Municipality of was initially assigned on 11 May 2016 and the last Credit Rating Action was taken on 12 Jun 2017.

The rating for ZAG000115148, LT Senior Unsecured, BOND, ZAR of Ekurhuleni, Metropolitan Municipality of was initially assigned on 11 May 2016 and the last Credit Rating Action was taken on 12 Jun 2017.

The rating for ZAG000127358, LT Senior Unsecured, BOND, ZAR of Ekurhuleni, Metropolitan Municipality of was initially assigned on 11 May 2016 and the last Credit Rating Action was taken on 12 Jun 2017.

The rating for ZAG000145194, LT Senior Unsecured, BOND, ZAR of Ekurhuleni, Metropolitan Municipality of was initially assigned on 04 Jul 2017 and the last Credit Rating Action was taken on 04 Jul 2017.

The rating for ZAG000145384, LT Senior Unsecured, BOND, ZAR of Ekurhuleni, Metropolitan Municipality of was initially assigned on 14 Jul 2017 and the last Credit Rating Action was taken on 14 Jul 2017.

The rating for 822158922, LT Senior Unsecured MTN, ZAR of Ekurhuleni, Metropolitan Municipality of was initially assigned on 11 May 2016 and the last Credit Rating Action was taken on 12 Jun 2017.

The rating for 820595948, LT Issuer Rating, ISSUER RATING ZAR of Johannesburg, City of was initially assigned on 11 May 2016 and the last Credit Rating Action was taken on 12 Jun 2017.

The rating for 820595948, ST Issuer Rating, ISSUER RATING ZAR of Johannesburg, City of was initially assigned on 11 May 2016 and the last Credit Rating Action was taken on 12 Jun 2017.

The rating for ZAG000030941, LT Senior Unsecured, BOND, ZAR of Johannesburg, City was initially assigned on 11 May 2016 and the last Credit Rating Action was taken on 12 Jun 2017.

The rating for ZAG000054339, LT Senior Unsecured, BOND, ZAR of Johannesburg, City was initially assigned on 11 May 2016 and the last Credit Rating Action was taken on 12 Jun 2017.

The rating for ZAG000137571, LT Senior Unsecured, BOND, ZAR of Johannesburg, City was initially assigned on 13 Jun 2016 and the last Credit Rating Action was taken on 12 Jun 2017.

The rating for 820965396, LT Senior Unsecured MTN, ZAR of Johannesburg, City of was initially assigned on 11 May 2016 and the last Credit Rating Action was taken on 12 Jun 2017.

The rating for 825092055, LT Senior Unsecured MTN, ZAR of Johannesburg, City of was initially assigned on 13 June 2016 and the last Credit Rating Action was taken on 12 Jun 2017.

The rating for 824341396, LT Issuer Rating, ISSUER RATING ZAR of Mangaung, Metropolitan Municipality, was initially assigned on 11 May 2016 and the last Credit Rating Action was taken on 12 Jun 2017.

The rating for 820596120 , LT Issuer Rating, ISSUER RATING ZAR of Mbombela, Municipality of, was initially assigned on 11 May 2016 and the last Credit Rating Action was taken on 12 Jun 2017.

The rating for 820596002, LT Issuer Rating, ISSUER RATING ZAR of Nelson Mandela, Metropolitan Municipality, was initially assigned on 11 May 2016 and the last Credit Rating Action was taken on 12 Jun 2017.

The rating for 820970107, LT Issuer Rating, ISSUER RATING ZAR of Rustenburg, Municipality of, was initially assigned on 11 May 2016 and the last Credit Rating Action was taken on 12 Jun 2017.

The rating for 820595950, LT Issuer Rating, ISSUER RATING ZAR of Tshwane, City of, was initially assigned on 11 May 2016 and the last Credit Rating Action was taken on 12 Jun 2017.

The rating for 825431399, LT Issuer Rating, ISSUER RATING ZAR of uMhlathuze, City of, was initially assigned on 18 Jul 2017 and the last Credit Rating Action was taken on 18 Jul 2017.

Only credit rating actions issued by Moody's Investors Service South Africa (Pty) Ltd are considered for the purpose of this disclosure.

Please see the ratings tab on the issuer page on www.moodys.com for additional rating history details. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it.

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Moody's considers a rated entity or its agent(s) to be participating when it maintains an overall relationship with Moody's. On this basis, these rated entities or their agent(s) are considered to be participating entities. The rated entities or their agent(s) generally provide Moody's with information for the purposes of their ratings process.

The main assumptions underlying the methodology used to determine the credit ratings for City Power Johannesburg, East Rand Water Care Company and South African National Roads Ag. Ltd (The) are:

1) Expected future trends for the relevant industry(ies) structure, competitive dynamics, supply & demand, regulatory environment, and technology are assumed to be predictive for the likelihood of default and expected loss.

2) Expectations for competitive/market position and management's capabilities and approach to business and financial risks are assumed to be predictive for the likelihood of default and expected loss.

3) Indicators for profitability, interest coverage, and asset quality are assumed to be predictive for the likelihood of default and expected loss, and the rating category criteria are believed to be appropriate.

4) Indicators for cash flow generation, leverage, and debt coverage are assumed to be predictive for the likelihood of default and expected loss, and the rating category criteria are believed to be appropriate.

5) Expectations for legal, regulatory, liquidity, and financial market risks, mergers/acquisitions and recapitalization events, integrity of financial reporting, corporate governance, and the likelihood and nature of support or weakening influence from a parent, affiliate, government or financial party are assumed to be predictive for the likelihood of default/expected loss.

The main assumptions underlying the methodology used to determine the credit ratings for Amathole, District Municipality of, Bergrivier, Municipality of, Breede Valley, Municipality of, Cape Town, City of, Ekurhuleni, City of, Johannesburg, City of, Mangaung, Metropolitan Municipality, Mbombela, Municipality of, Nelson Mandela, Metropolitan Municipality, Rustenburg, Municipality of, Tshwane, City of, and uMhlathuze, City of are :

1) Expected future economic trends and operating environment of the relevant sector are assumed to be predictive for the likelihood of default and expected loss.

2) Expectations for institutional framework and management's capabilities and approach to financial risks are assumed to be predictive for the likelihood of default and expected loss.

3) Indicators for financial position and performance are assumed to be predictive for the likelihood of default and expected loss, and the rating category criteria are believed to be appropriate.

4) Indicators for leverage and debt coverage are assumed to be predictive for the likelihood of default and expected loss, and the rating category criteria are believed to be appropriate.

5) Expectations for legal, regulatory, liquidity, and financial market risks, integrity and transparency of financial reporting, governance, financial performance of counterparties and the likelihood and nature of support by a government or financial party are assumed to be predictive for the likelihood of default/expected loss.

Information sources used to prepare the ratings are the following: parties involved in the rating, public information, and confidential and proprietary Moody's information.

Information types used to prepare the include the following: Financial data, Economic and demographic data, Public information, and Moody's information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing this review and of appropriate quality relative to that available for similar rated entities, obligations or credits.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating. Moody's adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

The ratings have been disclosed to the rated entities prior to public dissemination.

Credit ratings are Moody's current opinions of the relative future credit risk of entities, credit commitments, or debt or debt-like securities rated by Moody's. Moody's defines credit risk as the risk that an entity may not meet its contractual, financial obligations as they come due and any estimated financial loss in the event of default. Credit ratings do not address any other risk, including but not limited to: market liquidity risk, market value risk, or price volatility. Credit ratings are not statements of current or historical fact. Credit ratings do not constitute investment or financial advice, and credit ratings are not recommendations to purchase, sell, or hold particular securities. Credit ratings do not comment on the suitability of an investment for any particular investor. Moody's issues its credit ratings with the expectation and understanding that each investor will make its own study and evaluation of each security that is under consideration for purchase, holding, or sale.

1) An entity's competitive position is expected to be stable over the 18 -- 24 month rating horizon and generally will not lead to rating volatility. Unexpected changes in technology, regulation, market participants or consumer preferences that negatively (or positively) impact an entity's competitive position within its market, may lead to multiple notch ratings changes during the course of the ratings horizon.

2) Operating strategy effectiveness is typically evidenced by an entity's performance metrics over the medium to long term, typically beyond the rating horizon, and generally will not lead to rating volatility. Changes in performance metrics during the 18-24 month rating horizon will not generally lead to high degrees of rating volatility (more than 1 rating notch). Sustained improvement or deterioration in performance metrics beyond Moody's expectations could lead to multi notch rating changes.

3) Rating levels are highly sensitive to financial strategy. Material changes to financial strategy which increase or decrease financial risk and liquidity may change the entity's ability to weather financial and business cycles. A change in appetite for financial risk may lead to multi-notch downward rating changes. Changes in financial strategy which reduce risk are likely to lead to single notch upward rating changes during the rating horizon.

4) Rating levels can be sensitive to changes in assumptions about an entity's financial position. Metrics that measure financial position tend to vary within a range of expected levels during the course of an 18 -- 24 month rating horizon, and modest variances are not expected to lead to multi-notch rating changes. Large, unexpected changes to assumptions regarding financial position, including measures related to financial leverage, liquidity, and resources available to meet financial obligations, may trigger multi-notch rating changes over the ratings horizon.

5) Rating levels can be greatly impacted by changes in governance structure. Enterprise governance is expected to be stable during and beyond the rating horizon, and therefore not cause volatility in ratings. Material changes in governance, ownership structure, or support to or from other entities are likely to lead to multi notch rating changes.

1) Fundamental elements to economic performance are typically based on slow moving factors, such as demographic shifts or transformational changes to technology. Economic growth and wealth forms an important basis of the financial foundation of a government and is expected to remain stable over extended periods of time. Moderate, short-term swings in economic trends are not likely to lead to rating volatility. Unexpected/severe downgrades/shocks to economic trends are more likely to result in a higher degree of volatility to the downside or multi notch rating changes. Sustained improvements in economic trends may generally result in upward movement in ratings by one notch.

2) The institutional framework, which is established by a set of legislative acts, and management's capabilities and approach to financial risks tend to be stable over time. Changes to the institutional framework typically occur at a slow pace, providing ample time for an administration to adopt new policies and procedures to minimize the potential financial impacts. Jurisdictions where staff turnover is high may lead to greater volatility in the assessment of management's abilities. Sudden unpredictable changes can lead to institutional instability. Rating levels are sensitive to the authority's capability to formulate and implement cohesive policy. Material deterioration in the capability to effectively formulate and implement policy can lead to a multi-notch downgrade / downside rating pressure. Sustained improvements in the capability to effectively formulate and implement policy may generally result in upward movement in ratings by one notch.

3) Sustained positive/negative trends in financial position and performance, impacting a variety of financial indicators such as cash from operations and borrowing requirements, can lead to positive/negative ratings changes over the rating horizon. Changes in these financial indicators may lead to changes in debt burdens which impacts the probability of default. Short-term fluctuations, especially when not accompanied by a defining trend, would generally not impact the rating level itself and not necessarily lead to rating changes. Systemic changes in financial position and performance are more likely to result in a higher degree of volatility to the downside or multi notch rating changes. Sustained improvements in financial position and performance may generally result in upward movement in ratings by one notch.

4) Rating levels are sensitive to leverage and debt coverage metrics. Material increase in leverage ratios are more likely to lead to negative rating pressure while improvements in debt coverage are more likely to lead to positive rating pressure. Combined severe deterioration in debt burden and debt affordability are likely to lead to a multi-notch downgrade / downgrade rating pressure. Sustained improvements in these factors may generally lead to upward movement in ratings by one-notch.

5) A rapid deterioration in political stability, government and external liquidity position, or banking system health over a short period of time are usually associated with multi-notch downward rating moves. Sustained improvements in these factors may lead to upward rating movements, usually confined to one notch.

The sensitivity to assumptions for the credit ratings for City Power Johannesburg , East Rand Water Care Company and South African National Roads Ag. Ltd (The) are :

1) Moody's assumptions about the entity's competitive position within its business sector are presumed to remain stable over our rating horizon (18-24 months). Factors that can affect the entity's competitive position include changes in market share over time; disruptive pricing affecting either a) customer demand or b) the cost of supplying goods or services; new market entrants; barriers to entry of new competitors; or product substitution. If Moody's assumptions of competitive position are inaccurate, and the entity experiences forces which are expected to lead to sustained improvement or degradation in competitive position for the longer term, this may cause ratings to move upwards or downwards, depending on the speed of change and the entity's ability to react to the change. Examples include changes in energy or commodity prices, reduced demand for a facility do to a change in service level, or less demand for an enterprise due to slowing economic conditions. Examples include a spike in the price of a commodity that a power plant relies on to generate its power or the loss of connecting passenger service at a hub airport.

2) Moody's assumes that an entity's business profile, which incorporates its operating strategy, will evolve slowly, and is therefore unlikely to lead to rating changes over the 18 -- 24 month rating horizon. Business profile captures fundamental differences between entities in the same sector. An entity's overall business profile incorporates expectations of volatility in revenue and earnings; the perceived strength of the entity's position in its market; and characteristics of its product offering, such as differentiation with competitive offerings and proven adoption by customers. Operating strategy encompasses decisions regarding the entity's supply chain and distribution channels; decisions regarding outsourcing production versus operating production facilities; directing growth capital towards acquisitions rather than internal development; or divesting a stable but mature business for one which is believed to offer greater future growth at the cost of higher near-term investment. Ratings are sensitive to differences in business profile. For example, higher levels of product, segment or geographic diversification are generally a positive factor which is likely to reduce volatility in sales and earnings. The entity's degree of vertical integration has mixed considerations for ratings; vertical integration provides greater control over sourcing and distribution, but also creates a higher level of fixed costs which may be a burden during periods of cyclical declines. An entity's business profile will change slowly, generally due to strategic decisions which are executed in the long term, and therefore will rarely be the source of short term rating changes. If there is an unexpected change in business profile, such as a decision to add or divest business segments or enter new markets within a short period of time, it could result in rating changes of one or more notches to reflect the new view of risk and opportunities over the rating horizon.

3) Moody's ratings include assumptions about financial strategy and financial policy over the next 18 -- 24 months. Assumptions include management's appetite for debt incurrence and financial leverage; planning for debt maturities; management's decisions regarding deployment of capital; and deployment of profits (shareholder returns vs. investment in the business). Examples of changes to financial policy may be in the form of a shift in dividend policy; a change in how to finance seasonal working capital or manage timing of payables; or decisions of how much cash to hold in reserves to soften the impact of business cycles. Financial strategy is generally stable over the rating horizon. Unanticipated changes to a company's financial strategy, which may be accompanied by significant changes in financial leverage or capitalization, may lead to rating changes of one or more notches upwards or downwards.

4) Moody's assumptions about the entity's governance structure within its market(s) are generally stable over our rating horizon (18-24 months). Factors affecting governance include changes in ownership or control of the entity's operational and strategic decision making; support provided to, or received from, other corporate or government entities; the strength and independence of management; and participation in mergers, acquisitions or divestitures. Changes to an entity's governance are rare but could result in multi-notch rating changes as it could positively or negatively impact the entity's future operating strategy and financial position. Governance changes are common at the time of a sale or leveraged buy-out of a company, due to a change in financial policies which are expected to be adopted by the new owners. For example, expectations are that a sale to a financial buyer will be accompanied by financial policies which are associated with a higher risk profile. These types of transactions generally result in ratings being lowered by multiple notches at the time of the transaction. Conversely, a sale to a buyer (either company or investor) or an initial public offering of stock is associated with more benign financial policies, and may lead to an upgrade of one or more notches at the time of the sale.

5) Moody's ratings include assumptions about this entity's financial position, as measured by financial metrics, over the next 18 -- 24 months. Assumptions include the entity's anticipated earnings levels, operating expenses, interest rates paid on debt, and cash flow generation, all of which contribute to an entity's financial metrics. These measures may be impacted by unanticipated expenses, changes to interest rate levels, tax changes or business decisions that change expenditure or capital levels. Modest changes to financial metrics over short periods are typical within most companies and industries. Ratings are not generally sensitive to modest changes in financial metrics which are due to expected business cycles or economic cycles and which are not seen as affecting an entity's long term viability or business profile. However, expectations that an entity's financial metrics are likely to change meaningfully (either positively or negatively) for a longer term could lead to rating changes of one or more notches upwards or downwards. Examples that are common among all industries include one-time debt-funded share buybacks of significant size, which increase debt and cause leverage ratios to remain at higher levels than previously expected into the future. Rating downgrades of one or more notches are common in response to these scenarios.

The sensitivity to assumptions for the credit ratings Amathole, District Municipality of, Bergrivier, Municipality of, Breede Valley, Municipality of, Cape Town, City of, Ekurhuleni, City of, Johannesburg, City of, Mangaung, Metropolitan Municipality, Mbombela, Municipality of, Nelson Mandela, Metropolitan Municipality, Rustenburg, Municipality of, Tshwane, City of, and uMhlathuze, City of are:

1) Moody's expects economic factors and the operating environment to remain stable over a 12-18 month horizon. Ratings are sensitive to significant changes in assumptions of the future economic trends and the operating environment over an extended period of time. If economic trends are significantly weaker over a sustained period of time, ratings could face a one-notch downgrade. For example, a temporary recession followed by a return to typical growth levels would likely not result in a rating downgrade, but a permanent decline in a key sector of the economy resulting in a material decline in GDP per capita could result in a downgrade.

2) Moody's expects the institutional framework within which local and regional governments operate to be stable over the rating horizon. Changes in the institutional framework tend to be infrequent and modified on a slow pace. Ratings are sensitive to changes to these assumptions. For example, a constitutional change that allows for greater flexibility of revenue generation would result in a ratings upgrade. The sensitivity of the rating change would be relative to the change in the institutional framework.

3) Moody's assumes a local or regional government's financial position and performance metrics are stable over the 12-18 month horizon. The rating is weakly sensitive to short-term changes in these assumptions and more sensitive to changes in the multi-year trend. For example, a single year surplus matched with a moderate increase in revenue growth may not result in a rating change, while a significant deficit matched by a significant decrease in revenue, with multiple years of smaller deficits planned, could result in a multi-notch downgrade. A change in an entity's fiscal target could also result in a ratings change. For example, a focus on lower revenue growth, which threatens the recurrent achievement of balanced budgets, could result in a single notch downgrade.

4) Moody's expects assumptions for leverage and debt coverage to be stable over a 12-18 month horizon. Metrics that measure leverage and debt coverage tend to vary within a narrow range of expected levels during a 12-18 month period and modest variances are not expected to lead to multi-notch rating changes. Significant changes to these levels could result in multi-notch ratings. For example, a doubling of an entity's leverage within a 12 month span could result in a one or more notch downgrade. If actual results are materially different from assumptions, this could also result in multi-notch rating changes. For example, an entity's change in debt policy which results in a material decrease in debt coverage, as opposed to an assumption of stable debt coverage, could result in a one or more notch downgrade relative to the size of the change from assumptions.

5) Moody's assumes that the legal, regulatory and financial market risks are stable over the medium-term. Rating levels are sensitive to rapid changes in these factors. If these elements are strengthened and/or enforcement is increased, this could result in a one-notch upgrade. For example, if courts increase the enforcement of legal provisions in contracts, thereby increasing bondholder protection, this would be seen as a strengthening of the legal and regulatory framework, and may result in a one or more notch upgrade. If financial market risks deteriorate, such as a change in a Central Bank's policy towards foreign exchange markets, for example the fixing of the exchange rate to an artificially low level compared to market fundamentals, this could result in a one or more notch downgrade.

Please see Moody's Rating Symbols and Definitions on the Ratings Definitions page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Moody's credit ratings are opinions of the relative credit risk of financial obligations translating into an ordinal ranking of issuers and financial obligations across asset classes and geographies. As such, no absolute probability of default nor expected loss given default is assigned to each individual credit rating. Please refer to the following link for an index of Moody's default studies. Guides to Moody's Default Research.

Please see Moody's Rating Symbols and Definitions on the Ratings Definitions page on www.moodys.com for further information on the time horizon in which a credit rating action may be expected after a review or outlook action took place.

I hereby attest, as a person with responsibility for these Credit Rating Actions, that to the best of my knowledge, based on (i) my participation in the rating committee that determined to take these Credit Rating Actions, (ii) any materials I have reviewed in connection with the rating committee, and (iii) the attestations I have received from other members of the rating committee:

1) No part of these Credit Rating Actions were influenced by any other business activities of Moody's Corporation- i.e., this Credit Rating Action was not affected by the existence of, or potential for, other business relationships between Moody's Investors Service or its affiliates and the Rated Entity or its affiliates, or the non-existence of any such relationships;

2) These Credit Rating Actions were based solely on the merits of the obligor(s), security(ies) or instrument(s) being rated; and

3) These Credit Rating Actions were an independent evaluation of the credit risk of the obligor(s), security(ies), or instrument(s) assessed in these Credit Rating Actions and is subject to the potential limitations of the Credit Ratings disclosed with these Credit Rating Actions.

Mauro Crisafulli, Associate Managing Director

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Daniel Mazibuko
Associate Analyst
Sub-Sovereign Group
Moody's Investors Service South Africa (Pty) Ltd.
The Forum
2 Maude Street
2196 Sandton
Johannesburg
South Africa
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

David Rubinoff
MD - Sub Sovereigns
Sub-Sovereign Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Releasing Office:
Moody's Investors Service South Africa (Pty) Ltd.
The Forum
2 Maude Street
2196 Sandton
Johannesburg
South Africa
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

No Related Data.
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