Fitch Ratings said this week that its rating measurement of shoe maker, DSI Holdings Ltd (DSIHL) reflects the company's position as Sri Lanka's largest manufacturer and retailer of footwear, and its strong brand franchise.
It said DSIHL currently benefits from high import duties aimed at protecting the domestic footwear industry, which significantly lowered competition from imports. But Fitch noted that DSIHL's ratings are constrained by the financial profile of its parent, D Samson Group (Pvt) Ltd, which has a weaker stand-alone financial profile than DSIHL's.
On Wednesday, the ratings agency affirmed DSIHL National Long-term rating, as well as its outstanding senior unsecured notes at 'BBB+(lka)'. At the same time, the agency assigned a 'BBB+(lka)' National Long-term rating to the company's proposed senior unsecured debentures of up to Rs 800 million. "The Outlook is Stable," the agency said.
It said proceeds from the notes issue will be used to refinance the Rs 270 million long-term debt and fund its existing working capital. Hence, the proposed debt issue is not expected to materially change DSIHL's total debt balance.
As at end September 2009, DSIHL's total debt amounted to Rs 2.2 billion, of which about 77% comprised of short-term loans and overdrafts. Of the total Rs 510 million worth of long-term debt, about Rs 270 million was due to mature within a year.
DSIHL's liquidity position is supported by about Rs 370 million of undrawn facilities and Rs 120 million in cash as at September 2009.
Referring to an improvement in FY2009, this, it said, stemmed from an increase in sales of 12%, primarily driven by footwear price increases.
"Fitch expects DSIHL to maintain its credit metrics without much deterioration, given the relative stability in basic footwear sales (80% of DSIHL's revenues) and declining interest rates on borrowings." |
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