Empower your business in Sri Lanka and internationally with Prifinance expert corporate and financial services. Streamline company formation and investment opportunities with our tailored advice and solutions.

Singer (Sri Lanka) debentures given ‘A(lka)’ final rating: Fitch

May 4, 2013 (LBO) - Fitch Ratings said it had given a final rating of 'A(lka)' to a 1.5 billion rupee tranche of fixed interest rate unsecured debentures to which it had previously given an expected rating. "The issue proceeds are to be used to lengthen the maturity profile of existing debt, thereby improving Singer's liquidity profile, and will help reduce interest rate risk," Fitch said.

"The debentures are rated in line with Singer's existing unsecured redeemable debentures as they rank equally among themselves, and with Singer's other unsecured debt, in the event of liquidation."

Singer's rating reflects its market position as a leading consumer durables retailer, its strong brand portfolio, and an island-wide distribution network with coverage of over 1,000 outlets

"These strengths are counterbalanced by discretionary demand for Singer's products which result in cyclical earnings," Fitch said.

The full statement is reproduced below:

Fitch Rates Singer (Sri Lanka)'s debentures Final 'A(lka)'

Fitch Ratings-Colombo-03 May 2013: Fitch Ratings has assigned Singer (Sri Lanka) PLC's issue of unsecured redeemable debentures of up to LKR1.5bn with fixed coupon a final National Long-Term rating of 'A(lka)'.

The assignment of the final rating follows the receipt of final documents conforming to information previously received. The final rating is at the same level as the expected rating assigned on 11 April 2013 (see "Fitch Affirms Singer Sri Lanka Debt at 'A(lka)'; Rates Proposed Bonds 'A(lka)(EXP)" on www.fitchratings.com).

Rating Action Rationale

The issue proceeds are to be used to lengthen the maturity profile of existing debt, thereby improving Singer's liquidity profile, and will help reduce interest rate risk. The debentures are rated in line with Singer's existing unsecured redeemable debentures as they rank equally among themselves, and with Singer's other unsecured debt, in the event of liquidation.

Key Rating Drivers

Singer's rating reflects its market position as a leading consumer durables retailer, its strong brand portfolio, and its island-wide distribution network with coverage of over 1,000 outlets, 381 of which are exclusive. These strengths are counterbalanced by discretionary demand for Singer's products which result in cyclical earnings.

Singer's balance sheet is also exposed to fluctuations in the foreign exchange rate, as 70% of its products are imported and sold domestically. The remaining 30% is sourced domestically which to a certain extent reduces this exposure risk. The group has also managed demand-related risks by extending retail credit through its consumer finance operations. Debtor quality has generally remained satisfactory, with delinquent debtors at 2% of the total at end-2012, while write-offs have been negligible.

Rating Sensitivities

Negative: Future developments that may individually, or collectively, lead to negative rating action include:

-A material weakening of Singer's 80% subsidiary Singer Finance PLC's (SF, rated BBB+(lka)/Stable), given the strong linkages between the entities

-A sustained increase in Singer's leverage (measured as adjusted net debt/EBITDAR excluding SF) to over 4.5x (end-2012: 3.4x)

-A material weakening in Singer's (company-level) liquidity profile

-Fixed charge coverage (measured as EBITDAR/interest expense + rent, excluding SF) falling below 1.25x on a sustained basis (end-2012: 2.0x)

Positive: Singer's rating is constrained due to the inherent cyclicality of consumer durable sales

Subscribe
Notify of
guest
0 Comments
Inline Feedbacks
View all comments
Top
0
Would love your thoughts, please comment.x
()
x