Moody’s upgrades Acsa’s negative rating to stable

Credit rating firm Moody’s has lifted its outlook of majority stateowned Airports Company South Africa (Acsa) on the back of a recovery in activity in the sector, expectations of significant tariff increases to boost revenue, and a better debt picture.

It announced on Tuesday that it has changed Acsa’s outlook from negative to stable, and affirmed its Ba2 rating.

Moody’s further upgraded Acsa’s national scale long-term issuer rating to Aa1.za from Aa2.za and improved its Baseline Credit Assessment to Ba2 from Ba3.

“The stable outlook reflects Moody’s view that credit metrics will remain comfortably positioned for the current rating, supported by approved tariff increases, modest growth in traffic, and further debt reduction,” the rating agency noted.

“The change in outlook to stable reflects a recovery in traffic and deleveraging that has supported a strengthening of Acsa’s key credit metrics. The ratio of funds from operations [FFO] to debt, including preferred shares, rose to 14% in the 2022-23 financial year.”

A 4.5% tariff hike has been allowed for the 2023-24 periods while the 2024-25 period has been permitted a 10% tariff hike.

Moody’s believes these hikes – although below Acsa’s requested 17.5% annual tariff hike – together with recoveries in volumes will support Acsa’s revenue growth.

“There would be upward pressure on the rating if the government were upgraded and Acsa appeared likely to achieve an FFO interest coverage ratio consistently above 2.5x and FFO debt above the low teens,” Moody’s said.

On the other hand, Moody’s also noted that a downgrade of government’s rating or a sustained weakening of Acsa’s credit metrics and poorer debt levels could add downward pressure on the rating and sway it the other way.