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June 17 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has assigned SriLankan Airlines Limited’s (SLA) proposed issue of US dollar denominated government guaranteed bonds an expected rating of ‘BB-(EXP)'.
The proceeds of the issuance are likely to be used to acquire aircraft and as working capital.
The final rating is contingent upon receipt of final documents conforming to information already received.
The bonds are rated at the same level at SLA’s parent, the government of Sri Lanka (BB-/Stable), due to the unconditional and irrevocable guarantee provided by the government. The Sri Lankan government holds 92% of SLA directly and 7% indirectly through state-owned entities.
Sri Lanka’s sovereign rating is mainly driven by the country’s strengths in terms of a strong growth performance, high level of human development, and a strong payment record, against the weaknesses in both its fiscal and external balance sheets. Sri Lanka has substantial twin deficits and the government debt burden remains relatively high.
SLA is the national airline of Sri Lanka and has a 54% market share of travellers to and from the island both in terms of flight departures and available seat kilometres. Passenger numbers have increased to 4.3m in 2013 from 2.6m in 2010. As the leading airline, the company is well-positioned to capture the benefits of the government’s policy to promote and develop tourism to the island.
Negative: Future developments that may lead to negative rating action include:
- A downgrade of Sri Lanka’s sovereign ratings.
Positive: Future developments that may lead to positive rating action include:
- An upgrade of Sri Lanka’s sovereign ratings.