Fitch affirms Singer’s Ratings at ‘A-(lka)’

Removes RWN and assigns Stable Outlook:

Fitch Ratings has affirmed the National Long-term rating for Singer (Sri Lanka) PLC’s (SSP) senior unsecured notes at ‘A-(lka)’. The agency has simultaneously removed the Rating Watch Negative (RWN) on the notes and assigned a Stable Outlook.

The removal of the RWN reflects SSP’s improved liquidity position, stable sales in recent months and enhanced credit metrics aided by the cost rationalization measures undertaken in 2009.

SSP has secured an additional Rs. 250m in bank credit lines and has issued commercial paper amounting to Rs. 300m, since the previous review. Undrawn bank facilities amounted to Rs. 2.3bn as at June 2009 and remain sufficient to refinance the long-term debt set to mature within one year.

Despite a 16 percent (annualised) decline in sales in the H109, SSP’s consolidated adjusted net debt/operating EBITDAR improved to 4.3x during the period compared to 4.7x in FY08. This resulted from SSP’s cost curtailment measures and a reduction in working capital. Fitch also notes SSP’s stable monthly sales since June 2009, and does not expect any significant negative variation in the medium-term, since inflationary pressure on consumer income is currently low. This lends support to its current ratings and Stable Outlook.

Fitch believes that the credit risk of SSP’s consumer financing (CF) operation remains well-managed. SSP’s loan write-offs have historically been insignificant, and loans overdue 120+ days amounted to only 1.7 percent of its total consumer loan book as at June 2009. Sales funded by its in-house CF loans accounted for about 50 percent of SSP’s total sales (excluding interest income), and the loan book accounted for about 21 percent of its total assets as at June 2009.