Overview
- On Aug. 17, 2023, we revised our rating outlook on the state of South Australia to stable from negative.
- We therefore revised our rating outlook on South Australian Government Financing Authority (SAFA) to stable from negative, reflecting that on the state. At the same time, we affirmed our 'AA+/A-1+' issuer credit ratings on SAFA.
- Our ratings on SAFA reflect our assessment that there is an almost-certain likelihood of extraordinary support from the state government in a distress scenario.
Rating Action
On Aug. 17, 2023, S&P Global Ratings revised its rating outlook on South Australian Government Financing Authority (SAFA) to stable from negative. At the same time, we affirmed our 'AA+' long-term and 'A-1+' short-term issuer credit ratings on SAFA.
Outlook
The stable outlook on SAFA reflects that on its owner, the state of South Australia. The ratings on SAFA reflect our assessment that there is an almost-certain likelihood that South Australia would provide SAFA extraordinary support in a distress scenario.
Downside scenario
We would lower our ratings if we took a similar action on South Australia, or if we considered SAFA's role or link with the state to be weakening.
Upside scenario
We would raise our ratings on SAFA if we took a similar action on South Australia.
Rationale
The outlook revision reflects a similar action taken on SAFA's owner and guarantor, the state of South Australia.
Our ratings on SAFA reflect our assessment of an almost-certain likelihood that extraordinary support would be forthcoming from the state of South Australia in a distress scenario.
In accordance with our criteria for government-related entities, we base our view of an almost-certain likelihood of extraordinary support on our assessment of the following SAFA characteristics:
- Critical operational role in managing the state's and its authorities' debt as well as a significant proportion of the state's financial assets, and in providing corporate finance advice. If SAFA were to default, we believe it would have a critical effect on the South Australian government because the government guarantees SAFA's debt, and SAFA is the sole provider of debt financing to the state and its authorities.
- Integral link with the South Australian government. SAFA and its owner are so intrinsically linked that we assess the operations of SAFA and its management of borrowings, liquidity, and financial risks when considering our credit ratings on South Australia.
SAFA is the central financing authority for South Australia, its statutory authorities, and public trading enterprises. SAFA's business strategy is to provide clients with competitive debt funding and offer them financial risk and corporate finance advisory services. The authority also acts as the state's captive insurer through its insurance division, and operates the state's passenger and fleet vehicle operations through its Fleet division.
South Australia guarantees SAFA's payment obligations in relation to its borrowings, the securities it issues, and its derivative transactions under state laws. State laws also allow any amounts needed to fulfill any liability under the guarantees to be taken from the state's consolidated fund.
We do not assign a stand-alone credit profile because of the almost-certain likelihood of timely extraordinary government support, and we don't think SAFA would be subject to any transition risk because it is a nonseverable arm of the government.
Related Criteria
- General Criteria: Environmental, Social, And Governance Principles In Credit Ratings, Oct. 10, 2021
- General Criteria: Methodology For Linking Long-Term And Short-Term Ratings, April 7, 2017
- General Criteria: Rating Government-Related Entities: Methodology And Assumptions, March 25, 2015
- General Criteria: Principles Of Credit Ratings, Feb. 16, 2011
Ratings List
| Ratings Affirmed; Outlook Action | ||
|---|---|---|
| To | From | |
|
South Australian Government Financing Authority |
||
| Issuer Credit Rating | AA+/Stable/A-1+ | AA+/Negative/A-1+ |
| Ratings Affirmed | ||
|
South Australian Government Financing Authority |
||
| Senior Unsecured | AA+ | |
| Commercial Paper | A-1+ | |
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Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information. Complete ratings information is available to subscribers of RatingsDirect at www.capitaliq.com. All ratings affected by this rating action can be found on S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the left column.
| Primary Credit Analyst: | Rebecca Hrvatin, Melbourne + 61 3 9631 2123; rebecca.hrvatin@spglobal.com |
| Secondary Contact: | Sharad Jain, Melbourne + 61 3 9631 2077; sharad.jain@spglobal.com |
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