Fitch downgrades ratings of SriLankan Airlines bond & Sri Lanka Telecom

Dec 05, 2018 (LBO) – Fitch Ratings has downgraded the ratings on SriLankan Airlines 175 million US dollars government-guaranteed bonds due in June 2019 and Sri Lanka Telecom Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) to ‘B’ from ‘B+’.

This follows the downgrade of Sri Lanka’s Long-Term Foreign and Local-Currency Issuer Default Ratings to ‘B’ with a Stable Outlook.

SriLankan Airlines

The rating agency said the national carrier’s bonds are rated at the same level as SLA’s parent, the state of Sri Lanka, due to the unconditional and irrevocable guarantee provided by the state. The Sri Lankan government held 99.5 percent of SLA at end-2017 through direct and indirect holdings.

Sri Lanka Telecom

The agency has also affirmed Sri Lanka Telecom’s National Long-Term Rating at ‘AAA(lka)’ with a stable outlook and has affirmed the national rating at ‘AAA(lka)’ on the 7 billion rupees debt programme.

SLT’s IDRs are constrained by Sri Lanka’s IDRs as per Fitch’s Government-Related Entities Rating Criteria, as the state holds a majority stake in SLT directly and indirectly, and exercises significant influence on its operating and financial profile.

The agency said SLT’s second-biggest shareholder, Malaysia’s Usaha Tegas Sdn Bhd at 44.9 percent, has no special provisions in its shareholder agreement to dilute the government’s significant influence over SLT.

“SLT’s standalone credit profile, assessed by Fitch at ‘BB’, is stronger than that of its owner, reflecting the company’s market-leading position in fixed-line services and second-largest position in mobile, along with its ownership of an extensive optical-fibre network,”

“The standalone profile is also underpinned by its mid-single-digit percentage growth prospects, moderate estimated 2018 FFO adjusted net leverage of 1.7x and stable operating EBITDAR margin.”