Fitch Assigns Abans’ Notes ‘BBB+(lka)’ Final Rating

Fitch Ratings-Colombo-09 December 2019:

Fitch Ratings has assigned Abans PLC’s (Abans; BBB+(lka)/Stable) proposed senior unsecured redeemable debenture issue a final National Long-Term rating of ‘BBB+(lka)’.

The final rating is the same as the expected rating assigned on 6 November 2019, and follows the receipt of documents conforming to information already received other than the amount of the debenture.

The proposed debentures totaling up to LKR350 million will be listed on the Colombo Stock Exchange, have a fixed coupon rate with a tenor of five years, and the proceeds will be used to refinance part of the existing debt.

KEY RATING DRIVERS

The debentures are rated at the same level as Abans’ National Long-Term Rating because they constitute direct, unsecured and unsubordinated obligations of the issuer, and because unsecured creditors are not materially subordinated to prior-ranking and secured debt. We expect prior-ranking debt to remain below 2.5x EBITDA (forecast for financial year ending March 2020: 1.7x) over the medium term. We do not believe the decrease of the issuance from LKR2.0 billion to LKR350 million affects Abans’ credit profile as the company says it has sufficient credit facilities lined up to refinance near-term maturities.

RATING SENSITIVITIES

Any change in Abans’ National Long-Term Rating will result in a similar change in the rating of the proposed notes.

CRITERIA VARIATION

Fitch’s Corporate Rating Criteria allows for the deconsolidation of subsidiaries that are regulated banks from the financials of an industrial parent company when assessing the parent’s credit rating. Abans Finance, which is 50%-owned by Abans, is a regulated finance company and not a bank, but local regulations for finance companies are similar to those applicable to local banks. Therefore, Fitch has deconsolidated Abans Finance from Abans’ consolidated financials.