(The following statement was released by the rating agency)
March 15 – Fitch Ratings says in a new report that state support
is largely incorporated into African corporate ratings. The agency gives credit
to most African rated state-owned enterprises (SOEs) for the support provided by
their respective states.
Fitch’s approach to rating corporate SOEs follows its “Parent and Subsidiary
Rating Linkage” criteria, where the legal, strategic and operational links are
analysed to assess the degree of linkage between the parent, i.e. the state and
its subsidiary and the extent to which the respective ratings should be
correlated.
Fitch’s SOEs portfolio in Africa includes 12 corporate entities spread across
three countries: South Africa (‘BBB+’/Negative), Namibia (‘BBB-‘/Stable) and
Tunisia (‘BBB-‘/Negative). Of these, 11 are fully-state owned and their ratings
are closely linked to their respective states, albeit with different degrees of
notching. The notching across the portfolio varies from 0 to 3 notches. The
equalisation of SOEs ratings to the state’s ratings is applied to only one-sixth
of African SOEs rated by Fitch.
The report focuses on National Scale ratings, which for are essentially impacted
by the level of their respective states’ support. The standalone credit profile
remains as important and significant business or credit deterioration may
pressure the ratings in the absence of state support and hence widen the
notching applied. Although movements in a sovereign’s international rating do
not automatically impact SOEs National Ratings, sovereign rating pressure poses
the risk of weakening or discontinued state support.
The full report, entitled “Sovereign Ownership and Implications on Corporate Ratings in
Africa” is available at www.fitchratings.com.
Link to Fitch Ratings’ Report: Sovereign Ownership and Implications on Corporate Ratings in
Africa
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