The Aitken Spence Group secured an AA (sri) rating for its upcoming Rs. 1 bn five-year unlisted debenture issue from Fitch Ratings Lanka.
The group needs the cash to fund its 100 MW power plant in Embilipitya and feed some of its ongoing capital expenditure programmes.rn
rnFitch also confirmed an AA (sri) rating for Aitken Spences Rs. 400 mn four-year debenture which matures in 2006.rn
rnAn AA (sri) rating indicates a very low expectation of credit risk and a strong capacity to meet financial commitments on time. This capacity is not significantly vulnerable to foreseeable events.rn
rnFitch says the rating reflects Aitken Spence strong management team and relatively long and proven track record of profitable operations, especially in leisure and cargo logistics. rn
rnFurther the rating takes into account the reduced exposure to the cyclicality of the tourism industry due to the Groups diverse investments, mainly in the power segment. rn
rnThe Group will be exposed to start up project risk during the construction and pre commissioning stages of the Embilipitiya power plant, explains Fitch. rn
rnTogether with this plant, contribution from power is estimated to account for around 40 percent to 50 percent of the Groups revenue in 2006. rn
rnCorrespondingly however, this will see an increase in counterparty exposure to the Ceylon Electricity Board (CEB), though supported by sovereign guarantees. rn
rnFor the 2003-4 financial year, Earnings Before Interest, Tax, Deprecation & Amortisation or EBITDA, jumped 66 percent year on year, largely contributed by the Power Segment (49 percent of EBITDA growth) and Tourism segment (35 percent of EBITDA growth). rn
rnEBITDA inclusive of Rs. 166mn capital gain on sale of shares was Rs. 2,518 mn for 2003-4 financial year. Growth in EBITDA coupled with lower debt levels compared to FY 2002/03 contributed towards significant improvement in creditor protection indicators. rn
rnAs at March 2004, total debt amounted to Rs. 3,703 mn of which 60% were long term. rn
rnPower sector related debt accounted to 68 percent of total debt. However, 85 percent of the power sector debt (Rs. 2,115 mn) have been raised at the subsidiary level and have been provided by the financiers against the respective project assets. rn
rnLong term debt is expected to increase further by around Rs 2.3 bn in the current year mainly due to the debt of the joint venture Ace Power Embilipitiya Ltd. However, around Rs. 2.0 bn of the debt of the joint venture are pledged against its assets. rn
rnIn FY2003/04, net cashflow from operating activities increased to Rs. 1,591 mn from Rs. 318 mn in the previous year. Negative free cashflow of Rs. 910 mn, due to the capital investments in the power sector in FY2002/03 improved to a positive Rs. 1,267 mn due to comparatively lower capital expenditure in FY 2003/04. rn
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-LBO Newsdesk: LBOEmail@vanguardlanka.comrn