Singer picks up A+(sri) rating for upcoming debenture

Singer Sri Lanka walked off with a A+(sri) rating from Fitch Ratings Sri Lanka for its upcoming four-year Rs. 500 million debenture. Singer Sri Lanka walked off with a A+(sri) rating from Fitch Ratings Sri Lanka for its upcoming four-year Rs. 500 million debenture. Fitch also affirmed ratings assigned to Singer’s existing debentures of:
• Rs. 300 million (2005-9)
• Rs. 204 million (2004-8)
• Rs. 250 million (2004-8)
• Rs. 300 million (2002-5)

The rating outlook is stable, Fitch Ratings said on Tuesday.

Singer Sri Lanka (SSL) came out with a Rs. 300 million issue in April to fund its working capital – a large part of which is made up of hire-purchase debtors.

The proposed issue, which is inline with Fitch’s expected financing plan for SSL for financial year 2005, will be utilised to rollover the Rs. 300 million debenture maturing in October 2005.

The reminder will go to fund the growing hire-purchase loan book of the company.

The issue will also spread the maturity profile of the company’s debt which is somewhat currently skewed towards the short-term.

SSL’s leverage measured by Debt/ EBITDA was 2.7(x) for FY04 (improved from 3.1(x) for FY03).

The company’s credit metrics are strong for the current rating category and will likely remain largely unchanged despite increased debt as a result of healthy earnings generated by SSL’s financing operations and increased earnings retention since FY03.

“A large portion of the debt at SSL is due to its financing operations (hire-purchase sales account for about 50 percent of total sales) for which a differing capital structure apply from that for a pure retailing operation,” explains Fitch.

The robust financing operation of the company boasts of quality assets with defaults maintained at less than two percent consistently.

Fitch Ratings Lanka Ltd is a joint venture between Fitch Ratings, USA, International Finance Corporation Washington, Central Bank of Sri Lanka and several other leading local financial institutions.

Fitch Ratings USA, is one of the three global full service credit rating agencies and rates over 90 sovereign nations, 8,500 structured finance ratings, 3,200 international banks and financial institutions and 1,200 Corporates.

-LBO Newsdesk: LBOEmail@vanguardlk.com