The CFO explains that Pepkor has worked hard to demonstrate that it operates separately from Steinhoff.
Moody’s has upgraded Pepkor’s corporate family rating from Ba3 to Ba2, its probability of default rating from Ba3-PD to Ba2-PD, as well as its national scale long-term rating from A2.za to Aa1.za. As a result, the revised outlook on Pepkor’s credit rating has gone from negative to stable.
Pepkor CFO Riaan Hanekom says he is very pleased with the upgrade in Pepkor’s credit rating. “This is a testament to the group’s continued resilient performance through economic cycles and especially in times of crisis.”
He explains that, over the past five years, Pepkor has been successful in reducing its level of debt substantially based on strong cash generation. “In addition, we have reduced the group’s cost of funding with the diversification of funding sources to include a R10 billion domestic medium-term note programme, which is underpinned by the Moody’s credit rating.”
At present, he adds that the group has issued notes to the value of only R3.2 billion of the R10 billion programme. “An improved credit rating will enable us to secure funding at more competitive rates, which should further reduce the group's cost of funding.”
Riaan says Pepkor first obtained its credit rating in 2019 and the rating was initially constrained by the uncertainty around Steinhoff’s 71 percent interest in the company at the time. “It has taken time and a substantial amount of work to demonstrate through our performance that Pepkor operates independently of Steinhoff and has always had high corporate governance standards.”
He concludes that, as it stands today, Pepkor has a strong balance sheet with sufficient flexibility and liquidity to deliver on growth opportunities.