Fitch rates Abans's Commercial Paper ‘F2 (lka)’
Fitch Ratings has assigned Sri Lanka's Abans Pvt Limited's (Abans,
‘A-(lka)/Stable’) commercial paper (CP) issue of up to Rs 250 million a
National Short-Term rating of ‘F2(lka)'.
The issue has a tenor of up to three months, and will be used to fund
the company's working capital requirements. At end-September 2012,
Abans's cash reserves of Rs1.05 billion covered 54 of outstanding CP and
debentures maturing in less than one year.
Non-bank institutional investors account for the majority of Abans's
outstanding CP. Such investors are more likely to withdraw investments
at short notice and could create liquidity risk for a borrower in the
absence of dedicated liquidity backup lines (from banks) covering CP
maturities. In this respect, Abans has confirmed that on average about
80 % of its CP is rolled over on maturity. This, combined with Abans’
access to domestic banks as one of Sri Lanka's leading consumer durables
retailers and its satisfactory balance sheet, mitigates liquidity risk.
Apart from CP's, debentures, as well as deposits at its finance
company subsidiary - Abans Finance PLC (AFP), Abans also has short-term
debt of Rs 3.7 billion consisting of import loans and credit lines from
banks which carry low liquidity risk.
This is because banks are likely to roll these over so long as the
borrowers’ business- and financial-risks do not increase materially. The
Stable Outlook on Abans's National Long-Term rating reflects Fitch's
view that the company is likely to maintain a satisfactory credit
profile over the medium-term despite a slowing economy and higher
inflation, underpinned by its strong market position in consumer
durables in Sri Lanka. |