Uncertainty surrounds MTD Walkers (KAPI) upcoming Rs2.1bn debenture maturity

September 26, 2018 (LBO) – Colombo Stock Exchange (CSE) listed MTD Walkers (KAPI) has left debt market investors on the edge with regard to the company’s upcoming debenture maturity.

KAPI will have to refund Rs2.1bn to investors at the end of the week on September 30th 2018.  The debenture is maturing after its three year specified duration. Major holders of the instrument are mostly financial institutions and other institutional investors.

KAPI has been reporting heavy losses in the last few quarters, with last quarters loss particularly bad at Rs830mn.  The previous sequential quarterly loss was Rs511mn.

The company has also been involved in a conflict of interest scandal with its Deputy Chairman also being a senior director of a state bank to whom the firm has significant credit exposure.

There is concern in the marketplace about KAPI’s ability to pay the debenture on maturity. Analysts say a default of this scale will be highly damaging to Sri Lanka’s nascent corporate debt market.  The company’s credit rating was recently downgraded by ICRA from BB+ (negative) to BB- (negative).

The company has responded to a query from the CSE regarding the debenture with a disclosure stating:

“We are aware of the obligation to repay the type A debentures in line with our obligations on the due date. The company is making every endeavour to meet its obligations as per the debenture deed of trust.”