Fitch affirms Hayleys at ‘AA-(lka)’ Removes RWN; assigns negative outlook

Thursday, 25 November 2010 01:02 - - {{hitsCtrl.values.hits}}

Fitch Ratings has yesterday affirmed Sri Lanka-based Hayleys PLC’s (Hayleys) National Long-term rating at ‘AA-(lka)’. Following further evaluation the agency has simultaneously removed the Rating Watch Negative (RWN) on Hayleys and assigned a Negative Outlook.

The assignment of the Negative Outlook mainly reflects Fitch’s concerns with regards to the continuation of Hayleys increased leverage levels at its holding company, post the acquisition of the Alumex group.

Based on unaudited financials for the six months to end-September 2010, this transaction would increase Hayleys’ leverage (adjusted net debt/operating EBITDAR) as a holding company to above 5.5x. This leverage level incorporates cash inflows of about Rs. 900 m due to a part sale of Alumex to a third party.

However, the strong financial profiles, control over operational and financial policies as well as the ability to extract higher dividends than that was paid historically from some of Hayley’s key divisions act as mitigating factors to the holding company’s increased leverage levels at this point in time.

Fitch also takes comfort from the management’s expected strategies of further cash inflows in the near-term to the holding company through asset sales and other measures.

A downgrade could be warranted, if cash inflows either through asset sales or higher than normal dividends do not materialise resulting in Hayleys’ leverage as a holding company stagnating above 3.5x within the next six months.

Hayleys MGT finds negative discrepancy in stocks

Hayleys MGT Knitting Mills (MGT) on Tuesday in a filing to the Colombo Stock Exchange said that a physical stock verification and an inquiry into the debtors of the company was commenced on or around 01 November 2010 and are pending completion.

They have revealed the possibility of the existence of a negative discrepancy between the actual inventories and the receivables and the information disclosed in the latest balance sheet of the company (as at 30 September 2010) in respect therefore, which may affect the price of its securities.

The share price yesterday closed 60 cents down to Rs. 33.