Fitch rates Singer's proposed senior debentures at 'A(lka)'

Fitch Ratings Lanka has assigned Singer (Sri Lanka) PLC's (Singer) proposed three-year senior unsecured redeemable debentures of up to Rs1billion a National Long-Term rating of 'A(lka)'.

The outlook is stable. The rating reflects Singer's market position as one of Sri Lanka's largest consumer durables retailers, as well as its established franchise and extensive distribution network.

The rating also reflects the company's multi-brand product portfolio that is diversified across price points and its well managed financing operations. Also, Singer has good access to credit from local banks, and regularly accesses capital markets to raise debt which has broadened its funding avenues.

Singer expects to utilise part of the issue proceeds to repay maturing debentures, while the remainder will help restructure its balance sheet by lengthening the maturity profile of its debt.

The debenture will have a bullet repayment of principal at maturity, which is in three years post-issuance, and quarterly coupon payments at either a fixed or floating rate.

Singer's financial leverage (adjusted debt net of cash/operating EBITDAR), excluding debt of its subsidiary Singer Finance (Lanka) PLC (SFL, 'BBB+(lka)'/stable), was low at around 2.4 x, and well below the 4.5 x threshold for its current rating. The company's liquidity was sufficient at end-June 2012, with cash reserves of Rs 362 m and unutilised but approved bank lines of Rs 2.1billion covering term-debt due within a year of Rs610 million.

A further Rs 5billion of Singer's company-level debt consists of short-term facilities, and is used to fund its working capital requirements. Fitch does not expect its working capital dynamics to deteriorate materially in the near term given Singer's strong market position and strong bargaining power with its suppliers and distributors.