Fitch Ratings has downgraded Sri-Lanka based Hela Apparel Holdings PLC's National Long-Term Rating to 'BB+(lka)', from 'AA- (lka)'. The Outlook is Negative.
The downgrade follows the sharp deterioration in Hela's financial profile following the apparel manufacturer's significant adjustment of financial accounts from the interim accounts during its annual audit for the financial year ended March 2023 (FY23).
Hela reported additional operating costs of more than USD6 million, leading to a nearly 80% reduction in EBIT, and higher finance costs of more than USD1.6 million, cutting EBITDA interest cover to 0.3x, from 0.8x.
"The Negative Outlook reflects our expectation that interest coverage will stay weak in the next 12 months, leading to continued strain on liquidity," the rating agency said.
"We expect Hela to continue to make EBITDA losses in the next 12 months, leaving the company entirely reliant on the success of its turnaround strategy and the support of external lenders."Fitch-Downgrades-Hela-Apparel-Holdings-to-BBlka_-Outlook-Negative