The Sri Lankan office of Fitch Ratings this week announced that it would be reviewing Aitken Spence's "senior unsecured notes 'AA(lka)' National Long term rating". This follows a Colombo Stock Exchange filing last week which indicated that Aitken Spence had a 30% stake in a Sino-Lanka consortium that had successfully bid to design, build, operate and transfer the 1.2 kilometres long / 18 metres deep South Container Terminal, the first terminal of the Colombo Port Expansion Project.
Fitch also noted the "possibility of a negative rating action if (Aitken Spence's) investment in the terminal project is largely funded by increased debt borrowings at the holding company". However, it did suggest that prior to its possible revision it was seeking further information regarding the "the quantum of investment and its funding, coupled with the information on project cash flows and dividend inflows to (Aitken Spence) when the terminal commences operations in FY14".
Fitch also indicated possible impact to the Aitken Spence's credit metrics, with one such "structural subordination risk" stemming from the company's minority stake in the consortium. A stake that may have cost as much as Rs. 4.5 billion, the company's probable share of equity of the total Rs. 50 million project.
Also stated was that this project may not result in divends for approximately 30 months, its completion period sans debt servicing. A problem, particularly since Aitken Spence's rating are "largely" driven by cashflows from dividends it earns from investments. A situation further exacerbated by dividends from the hotel and leisure being likely to be limited pending upgrades; while its power generation divends, which currently accounts for "over 75%" of total divends, are also anticipated, according to Fitch, to "fall after power purchase agreements of two of its three generation plants are renegotiated on expiry of existing contracts in FYE12 and FYE13". |
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