Sep 21, 2017

Singer rating unaffected by shareholder change

Hayleys PLC's acquisition of a controlling stake in Singer (Sri Lanka) PLC (Singer, A-(lka)/Stable) is neutral for Singer's rating. This move helps Hayleys' balance sheet to be stretched significantly following the completion of the Singer acquisition despite Hayleys' stronger business risk profile, Fitch Ratings agency said.

The purchase is likely to be largely funded by debt and existing cash. In Fitch's view, this is likely to limit Hayleys' ability to provide extraordinary support to Singer if required, especially given the size of Singer's own balance sheet and its significant debt.

On 15th September 2017, Hayleys purchased a 61.73% stake in Singer from its main shareholder Retail Holdings (Sri Lanka) BV for LKR10.9 billion. Retail Holdings will retain a stake of 9.47% for the time being while Hayleys will make a mandatory offer as required by local regulations to purchase the remaining 28.8% of Singer.

With the acquisition, Singer, the biggest consumer-durable retailer in the country, will become Hayleys' largest subsidiary,

There will not be additional pressure for higher dividend up streaming from Singer to its new parent as Singer's average dividend payout has been above 60% in the past, which is materially higher than what we have seen with most of Hayleys' subsidiaries, Fitch Ratings said.