Fitch assigns expected ‘BBB+(lka)(EXP) | Daily News


 

Abans’ proposed debentures

Fitch assigns expected ‘BBB+(lka)(EXP)

Fitch Ratings has assigned Sri Lankan retailer Abans PLC’s (BBB+(lka)/Stable) proposed senior unsecured redeemable debenture issue of up to Rs 2 billion an Expected National Long-Term Rating of ‘BBB+(lka)(EXP)’.

The debentures will be listed on the Colombo Stock Exchange, have a fixed coupon rate with a tenor of five years, and the proceeds will be used to refinance existing debt. The debentures are rated at the same level as Abans’ National Long-Term Rating because its senior unsecured debt is not materially subordinated to prior-ranking debt. This is because we expect prior ranking debt to remain below 2.5x EBITDA (FY20 forecast: 1.7x) over the medium term.

The final rating of the proposed debentures is subject to the receipt of final documents conforming to information already received. Strong Market Position: Abans’ ratings reflect its strong market position in consumer durables retail in Sri Lanka, its extensive brand portfolio, wide distribution network, and well-managed hire-purchase (HP) business, which are partly offset by investments in riskier non-core operations such as real estate and financial services, and also its high leverage.

We expect Abans’ EBITDAR margin to widen by around 100bp by financial year ending March 2021 (FY21) from 8.4% in FY19 as the company continues to reduce discount sales, align sales commissions with product profitability, and introduces automation and technology.

Margins should also benefit from a shift in the product mix towards high-margin brands. The EBITDAR margin widened by 300bp to 8.4% in FY19 and 30bp yoy to 9.5% in 1Q20, despite weak revenue growth.

 


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