Fitch rates Abans' Commercial Paper 'F2(lka)'
Fitch Ratings has assigned Abans (Pvt) Limited's (Abans,
'A-(lka)/Stable') commercial paper (CP) issue of up to Rs. 250 m, 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 bn covered 54 percent 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 percent
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 and deposits at its finance company
subsidiary - Abans Finance PLC (AFP), Abans also has short-term debt of
Rs 3.7 b 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.
|