Tranz Rail is rerated

Credit rating agency Moody's has moved its view on Tranz Rail's credit rating outlook from stable to negative.

Moody's said the change in outlook was prompted by Tranz Rail's challenge in controlling costs.

It said it expected that Tranz Rail would remain under continued cost pressure and that it would be difficult for the company to pass on all increased costs through rate increases.

"Also, there is uncertainty as to the outcome of its restructuring efforts."

It noted that Tranz Rail's financial performance was harmed by surging fuel costs, and costs related to the company's restructuring.

The agency said though revenue had picked up slightly through rate and volume increases, this was more than offset by cost increases.

On February 1, Tranz Rail reported a $6.7 million loss for the six months to December 31. The agency said the rating was likely to be lowered if sales of the Auckland corridor or other assets did not take place.

- NZPA