Softlogic Holdings to raise Rs.2 billion via commercial papers 

Softlogic Holdings PLC has proposed to raise Rs.2.0 billion via rated commercial papers as the company looks to refinance most of its debt given its heavy debt reliance for expansion and acquisitions. 

Although it isn’t immediately clear what the funds are for and when the company would issue the commercial papers, the company has mostly been reliant on refinancing its debt as it has a strong repayment track record and good relationships with banks and other funding parties. 

ICRA Lanka Limited assigned the commercial paper SL A3 rating. 
Commercial papers are typically short-term debt instruments, which have 3 to 6-month tenors and usually issued by entities with good credit ratings. 

The company has a BBB rating with a Negative outlook, affirmed in January by ICRA Lanka considering the resilience in the performance in some of the key segments of the group such as healthcare, retail, telco and insurance though under stressed market conditions. 

But the rating agency noted the group’s elevated debt levels as a rating concern. 

“ICRA Lanka notes that higher debt levels of the holding company is largely attributable to financial support extended to retail and leisure sectors of the group,” the rating report said. “ICRA Lanka also notes that SHL is largely dependent on refinancing its debt obligations, thus exposing the company to refinancing risk,” it added.

Softlogic group delivered robust financial performance for the three months ended December 31, 2021, its third fiscal quarter on blockbuster performance of its retail operations.  The group reported a net profit of Rs.1.25 billion for the quarter compared to Rs.52.25 in the same period in 2020 on revenues of Rs.31.9 billion, up 45 percent.  Its expansive retail operation generated revenues of Rs.16.9 billion, up 44 percent.  Despite the company’s higher debt levels and the reliance on rolling over its debt, ICRA Lanka said the recent increases in the share prices of its group entities had also increased its flexibility in refinancing.  “This reconfirms the intrinsic value of the group which therefore increases accessibility to funding lines”, they added.