(The following statement was released by the rating agency)
COLOMBO, March 31 (Fitch) Fitch Ratings has assigned Sri
Holdings PLC's (HHP) proposed issue of senior unsecured
redeemable debentures of
up to LKR1bn an expected rating of 'A+(lka)(EXP)'.
The final rating on the debentures is subject to the receipt of
documents conforming to information already received. The
proceeds of the
issuance are likely for refinancing existing debt, therefore
debt maturity profile.
HHP is a holding company (holdco) with key wholly owned
in fast-moving consumer goods, healthcare and transportation
company also has majority interests in subsidiaries across
leisure and power.
KEY RATING DRIVERS
Diversified Operations: Hemas' rating reflects the essential
nature of and
resilient demand for end products and services of its key
subsidiaries, supported by its low financial risk at the Holdco
levels. The rating also factors in the businesses' strong
brands, leading market
share and moderate free cash flow generation
Dependence on Subsidiaries Dividends: As a holding company Hemas
is dependent on
dividends and fees from its operating subsidiaries in order to
service debt at
the Holdco level. Fitch considers the structural subordination
creditors to be low, because Hemas' key subsidiaries are wholly
owned with low
leverage. However, should leverage at the holdco and the main,
operating subsidiaries in manufacturing, pharmaceutical, and
increase significantly, there will be negative pressure on the
PPA Re-negotiation and Renewal: The power purchase agreement
(PPA) of Hemas'
main dividend contributing plant Heladhanavi (HD) is up for
renewal in Dec 2014.
HD is a 100MW plant run as a joint venture between Hemas and
Lakdhanavi. In the event HD's PPA is not renewed the significant
Holdco dividend is likely to reduce. However, Fitch expects
impact to be lessened by the fact that the holdco leverage
adjusted for its
wholly owned subsidiaries is low.
Low leverage and Moderate Liquidity: Fitch expects that the
group is likely to
maintain financial leverage (measured as gross adjusted debt /
EBITDAR) at less than 3.0x over the medium term (Dec-13: 1.9x,
despite ongoing new investments and expansions across the group.
Negative: Future developments that may individually, or
collectively, lead to a
negative rating action include:
-Financial leverage being sustained above 3.0x at the
-Increase of financial leverage at the Holdco, manufacturing,
-Any unforeseen pressures on the credit profile of the
subsidiaries or Holdco
due to new investments.
Positive: Positive rating action is anticipated in the near term
in view of the
group's significant investment and expansion plans.
Additional information is available at www.fitchratings.com and
+ 94 11 254 1900
Fitch Ratings Lanka Limited
Level 15-04 East Tower
World Trade Center Colombo 01
Kanishka De Silva
+ 94 11 254 1900
+612 8256 0325
Applicable criteria, 'Corporate Rating Methodology', dated 31
Jan 2014, and
'National Scales Ratings Criteria', dated 30 October 2013, are
Media Relations: Bindu Menon, Mumbai, Tel: +91 22 4000 1727,
Additional information is available at www.fitchratings.com.
Applicable Criteria and Related Research:
National Scale Ratings Criteria
Corporate Rating Methodology: Including Short-Term Ratings and
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