Announcements

GCR affirms TPS Eastern Africa’s rating of A-(KE); Outlook Stable.

Johannesburg, 18 Jun 2014 — Global Credit Ratings has today affirmed the national scale ratings assigned to TPS Eastern Africa of A-(KE) and A2(KE) in the long term and short term respectively; with the outlook accorded as Stable. The rating(s) are valid until 06/2015.

SUMMARY RATING RATIONALE

Global Credit Ratings has accorded the above credit rating(s) to TPS Eastern Africa based on the following key criteria:

TPS Eastern Africa’s (“TPSEA”) well-entrenched position within the East African hospitality industry is underpinned by a comprehensive, branded luxury business and holiday offering. Shareholder backing, mainly from the Aga Khan Fund for Economic Development (“AKFED”) is evidenced through continued capital and operational support.

Although Kenyan occupancy rates have remained subdued, revenues were bolstered by the inclusion of TPS (Uganda), and rose by 28% to a high of KShs6.8bn in F13. The operating margin, however, declined to 15.8% (F12: 16.1%), with profitability likely to be curtailed until the local tourism industry rebounds. Nonetheless, discretionary cash flows have been fairly sound, reflecting the resilience of the group’s diversified earnings base. Interest cover rose to 7.5x in F13 (F12: 5.4x), while cash interest cover was at a sound 7.6x (F12: 8.6x). Despite the aforementioned margin compression, debt serviceability metrics are projected to remain above minimum thresholds for strongly rated corporates.

Debt eased further to KShs1.8bn at FYE13 (FYE12: KShs2.1bn), which saw net gearing and net debt to EBITDA outperform budget, at 15% and 101% respectively (FYE12: 26%; 162%). Although TPSEA plans to raise new debt to fund development and ongoing capex, its medium term gearing metrics are not expected to exceed management’s limit of 40%.

Despite improvements in regional tourism, weaker than envisaged economic fundamentals, particularly in the Eurozone, coupled with the waning competitiveness of Kenya’s tourist attractions in the wake of heightened security threats will continue to restrict international tourist volumes in the medium term. TPSEA’s regional operations are also susceptible to adverse regulatory changes, including punitive taxes, high park fees and haphazard development approvals.

A rating upgrade is deemed unlikely until there is an improvement in tourist inflows into Kenya. Nonetheless, the timely bedding down of new capacity (further diversifying the geographic footprint) would be positively viewed. If coupled with adherence to conservative gearing and robust debt serviceability, this scale enhancement could exert upward pressure on the ratings. However, protracted project disruptions, or the failure to contain spend within budget, could drive higher than planned debt levels, negatively impacting the group’s credit risk profile. Further security threats or adverse political developments, materially curtailing tourist numbers and thus earnings, could also warrant a ratings downgrade.

For a detailed glossary of terms utilised in this announcement please click here


NATIONAL SCALE RATINGS HISTORY

Initial rating (Jun/2009)
Long term: BBB+(KE); Short term: A2(KE)
Outlook: Stable

Last rating (Jul/2013)
Long term: A-(KE); Short term: A2(KE)
Outlook: Stable

ANALYTICAL CONTACTS

Primary Analyst
Patricia Zvarayi
Senior Analyst
(011) 784-1771
patricia@globalratings.net

Committee Chairperson
Eyal Shevel
Sector Head: Corporate & Public Sector Debt Ratings
(011) 784-1771
shevel@globalratings.net

APPLICABLE METHODOLOGIES AND RELATED RESEARCH

Criteria for Rating Corporate Entities, updated August 2013
TPS Eastern Africa Limited rating reports, 2009-2013

RATING LIMITATIONS AND DISCLAIMERS

ALL GCR’S CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://GLOBALRATINGS.NET/UNDERSTANDING-RATINGS. IN ADDITION, GCR’S RATING SCALES AND DEFINITIONS ARE ALSO AVAILABLE FOR DOWNLOAD AT THE FOLLOWING LINK: HTTP://GLOBALRATINGS.NET/RATINGS-INFO. GCR’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, PUBLICATION TERMS AND CONDITIONS AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE AT HTTP://GLOBALRATINGS.NET.

SALIENT FEATURES OF ACCORDED RATINGS

GCR affirms that a.) no part of the rating was influenced by any other business activities of the credit rating agency; b.) the rating was based solely on the merits of the rated entity, security or financial instrument being rated; c.) such rating Was an independent evaluation of the risks and merits of the rated entity, security or financial instrument.

TPS Eastern Africa participated in the rating process via face-to-face management meetings, teleconferences and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible.

The credit rating/s has been disclosed to TPS Eastern Africa with no contestation of the rating.

The information received from TPS Eastern Africa Limited and other reliable third parties to accord the credit rating included the 2013 audited annual financial statements (plus four years of comparative numbers), detailed 2014 financial budgets, 1Q 2014 management accounts, corporate governance and risk management framework, capital management policy, industry comparative data and regulatory framework, as well as a breakdown of facilities available and related counterparties.

image_pdfPDF View

Leave a Reply



ALL GCR CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS, TERMS OF USE OF SUCH RATINGS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS, TERMS OF USE AND DISCLAIMERS BY FOLLOWING THIS LINK:HTTP://GCRRATINGS.COM. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT WWW.GCRRATINGS.COM/RATING_INFORMATION. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. GCR's CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THIS SITE.

CREDIT RATINGS ISSUED AND RESEARCH PUBLICATIONS PUBLISHED BY GCR, ARE GCR’S OPINIONS, AS AT THE DATE OF ISSUE OR PUBLICATION THEREOF, OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. GCR DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL AND/OR FINANCIAL OBLIGATIONS AS THEY BECOME DUE. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: FRAUD, MARKET LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND GCR’S OPINIONS INCLUDED IN GCR’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND GCR’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND GCR’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL OR HOLD PARTICULAR SECURITIES. NEITHER GCR’S CREDIT RATINGS, NOR ITS PUBLICATIONS, COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. GCR ISSUES ITS CREDIT RATINGS AND PUBLISHES GCR’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING OR SALE.

Copyright © 2021 GCR INFORMATION PUBLISHED BY GCR MAY NOT BE COPIED OR OTHERWISE REPRODUCED OR DISCLOSED, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT GCR’S PRIOR WRITTEN CONSENT. Credit ratings are solicited by, or on behalf of, the issuer of the instrument in respect of which the rating is issued, and GCR is compensated for the provision of these ratings. Information sources used to prepare the ratings are set out in each credit rating report and/or rating notification and include the following: parties involved in the ratings and public information. All information used to prepare the ratings is obtained by GCR from sources reasonably believed by it to be accurate and reliable. Although GCR will at all times use its best efforts and practices to ensure that the information it relies on is accurate at the time, GCR does not provide any warranty in respect of, nor is it otherwise responsible for, the accurateness of such information.GCR adopts all reasonable measures to ensure that the information it uses in assigning a credit rating is of sufficient quality and that such information is obtained from sources that GCR, acting reasonably, considers to be reliable, including, when appropriate, independent third-party sources. However, GCR cannot in every instance independently verify or validate information received in the rating process. Under no circumstances shall GCR have any liability to any person or entity for (a) any loss or damage suffered by such person or entity caused by, resulting from, or relating to, any error made by GCR, whether negligently (including gross negligence) or otherwise, or other circumstance or contingency outside the control of GCR or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits) suffered by such person or entity, as a result of the use of or inability to use any such information. The ratings, financial reporting analysis, projections, and other observations, if any, constituting part of the information contained in each credit rating report and/or rating notification are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. Each user of the information contained in each credit rating report and/or rating notification must make its own study and evaluation of each security it may consider purchasing, holding or selling. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY GCR IN ANY FORM OR MANNER WHATSOEVER.