Fitch places Hayleys on RWN
Fitch Ratings Lanka has placed Hayleys PLC's (Hayleys) National
Long-term rating of 'AA-(lka)' on Rating Watch Negative (RWN).
This follows Hayleys group's announcement on November 4, of its
acquisition of Alumex Group for Rs 2.2 billion, of which Rs 2 billion
was funded using debt facilities at its holding company - Hayleys PLC.
The assignment of RWN reflects Fitch's view that Hayleys' rating
could be downgraded or affirmed over the near-term, subject to the
review of further material information.
The RWN reflects Fitch's concern that based on the increase in debt,
Hayleys' leverage (total adjusted net debt/EBITDAR) rising to a level no
longer commensurate with the current ratings.
As of September 30, 2010 (H111), Hayleys' total debt at holding
company was Rs 2.1 billion and its leverage was 3.5x.
The Alumex acquisition's debt funding of Rs 2 billion will
deteriorate this leverage level significantly.
The rating could be downgraded immediately, if it emerges that
Hayleys is unable to maintain leverage closer to pre-acquisition levels
as a result of certain planned measures that the management expect to
implement over the near-term.
Fitch had in its earlier announcement on May 30, 2010 highlighted
that an increase in indebtedness at the Hayleys' holding company level -
due to any future investments with limited control over dividend policy
or long payback periods - could result in negative pressure on Hayleys'
ratings. |