S&P: South Australian Government Financing Authority Outlook Revised To Positive After Similar State Action; Ratings Affirmed
The positive outlook reflects that on the ratings on the State of South Australia, as well as our expectation that SAFA's role will remain critical and its link integral to the state.
The ratings on SAFA reflect our assessment that there is an almost certain likelihood that extraordinary support would be forthcoming from SAFA's owner and guarantor, the State of South Australia (South Australia) in a distress scenario.
In accordance with our criteria for government-related entities (GREs), our view of an almost certain likelihood of extraordinary support is based on our assessment of SAFA's:Critical operational role in managing the state's and its authorities' debt, a significant proportion of the state's financial assets, and providing corporate finance advice and insurance services. In our view, a default by SAFA would have a critical impact for South Australia, given that the state government guarantees SAFA's debt and that SAFA is the sole provider of debt financing to the state and its authorities. Integral link with South Australia, which owns SAFA, as well as providing a guarantee. SAFA and its owner are so intrinsically linked that S&P Global Ratings assesses the operations of SAFA and its management of borrowings, liquidity, and financial risks when considering the credit rating on South Australia. SAFA is the central financing authority for South Australia, its statutory authorities, and public trading enterprises (PTEs). SAFA also provides its clients advisory services in financial risk and corporate finance. The authority also acts as the state's captive insurer through its SAICORP division, and operates the state's passenger and fleet vehicle operations through its Fleet SA division.
South Australia guarantees SAFA's payment obligations under state laws. State laws also allow any amounts needed to fulfil any liability under the guarantee to be taken from the state's general revenue.
We consider SAFA's operations and risk-management practices to be consistent with the 'AA' rating on the state. The rating on the state considers SAFA's financial management policies and practices because they have a significant role in carrying out the authority's debt and liquidity management.
We do not assign a stand-alone credit profile on SAFA because of the almost certain likelihood of timely extraordinary support from the South Australian government, and we don't think it would be subject to any transition risk given that it is a nonseverable arm of the state government.
The positive outlook reflects that on the ratings on the state, as well as our expectation that SAFA's role will remain critical and its link integral to the state over the next two years. We may revise the outlook to stable if a similar action occurs on the state.