International ratings agency Fitch recently amended its rating for Sri Lankan diversified conglomerate Hayleys to a "AA-(lka)" / Rating Watch Negative (RWN) following its reported Rs. 2.2 billion acquisition of Alumex completed November 4.
Alumex is a local group that has a 55% share of the country's aluminum extrusions market.
According to Fitch's Rating Action and Commentary (RAC), this reflects a "view that Hayleys' rating could be downgraded or affirmed over the near-term" due to an additional Rs. 2 billion in debt raised to fund the November 4 Alumex acquisition which had resulted in "Hayleys' leverage (total adjusted net debt / EBITDAR) rising to a level no longer commensurate with the current ratings."
The RAC also warns 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." Prior to acquisition, "Hayleys' total debt at holding company was LKR2.1bn and its leverage was 3.5x" based on financials dated September 30.
Meanwhile, a May 30 announcement by Fitch had previously warned of "negative pressure on Hayleys' ratings" should there be any further increase in debt, and specifically alluded to "future investments with limited control over dividend policy or long payback periods."
Also revealed in the RAC were Fitch's concerns regarding increased debt brought upon by "proposed plans at Hayleys' newly announced wind power project as well as expected refurbishment plans at Ceylon Continental Hotel in Colombo city", in addition September 30 financials indicated "Hayleys' hand protection, fibre and textile segments are currently stressed." |
E-mail
