Fitch downgrades Denel

Fitch Ratings said it downgraded Denel (SOC) Ltd.'s national long-term rating to B(zaf) from AA-(zaf) and national short-term rating to B(zaf) from F1+(zaf).

The agency also said it placed the ratings on Rating Watch negative.

The downgrades are a result of an evaluation of much weaker government support, Fitch said.

Denel continues to benefit from sovereign support through the government's irrevocable and unconditional guarantee most of its domestic medium-term notes, the agency said.

While this guarantee framework has now been extended through September 2023, it has clearly not been sufficient to address operational requirements and debt funding remains overwhelmingly short-term in nature, Fitch said.

Denel's standalone credit profile of CCC reflects the impact of the historical corporate governance issues the group has faced, resulting in management volatility and an uncertain strategic plan, the agency added.

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