Johannesburg, 02 May 2019 – GCR Ratings has today placed the national scale Issuer ratings for Omnia Holdings Limited of A-(ZA) and A1-(ZA) in the long term and short term respectively on Rating Watch. GCR Ratings has concurrently placed the national scale Issuer ratings for Omnia Group Investments Limited of A-(ZA) and A1-(ZA) in the long term and short term respectively on Rating Watch.
SUMMARY RATING RATIONALE
GCR Ratings (“GCR”) has accorded the above credit ratings to (“Omnia” or “the Group”) and Omnia Group Investments Limited based on the following key factors:
GCR has noted the earnings underperformance communicated in a recent trading update by the Group, which in view of the debt facilities drawn down as a result of its acquisitions (which were internally funded) could translate to higher gearing and debt service requirements than was previously considered. In this regard, GCR is of the view that the funding assessment may be lower/weaker, especially if the Group adopts higher gearing targets.
GCR has taken cognisance of the ongoing collaborative engagement between Omnia and its funders to reprofile the Group’s debt in view of Omnia’s evolving funding requirements, and that “the Group and these debt providers are still assessing the appropriateness of the required debt package”. It has also been noted that according to Omnia, there is no requirement for any unscheduled debt repayment or recapitalisation at this stage. In this regard, the successful conclusion of the ongoing engagement with funders within a reasonable timeframe, coupled with sound free cash flows, would bode positively in respect of GCR’s assessment of Omnia’s liquidity profile.
Cognisance has been taken of initiatives to enhance the earnings profile, including the rationalisation of the Chemicals business and timely completion of phase 1 of the Nitrophosphate plant. That said, the Group would be expected to demonstrate sustainable margin enhancement from the broader product profile and efficiency enhancements for these and other initiatives to be fully factored into the ratings.
|NATIONAL SCALE RATINGS HISTORY|
|Omnia Holdings Limited||Omnia Group Investments Limited|
|Initial rating (March 2009)||Initial rating (November 2016)|
|Long term: BBB+(ZA); Short term: A2(ZA)||Long term: A-(ZA); Short term: A1-(ZA)|
|Outlook: Stable||Outlook: Stable|
|Last rating (September 2018)||Last rating (September 2018)|
|Long term: A-(ZA); Short term: A1-(ZA)||Long term: A-(ZA); Short term: A1-(ZA)|
|Outlook: Stable||Outlook: Stable|
|Primary Analyst||Committee Chairperson|
|Patricia Zvarayi||Eyal Shevel|
|Deputy Sector Head: Corporate Ratings||Sector Head: Corporate Ratings|
|(011) 784-1771||(011) 784-1771|
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Global Master Criteria for Rating Corporate Entities, updated February 2018
Omnia Rating Reports, 2009-18
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 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 process was influenced by any other business activities of the credit rating agency; b.) the ratings were based solely on the merits of the rated entity, security or financial instrument being rated; c.) such ratings were an independent evaluation of the risks and merits of the rated entity, security or financial instrument; and d.) the validity of the ratings is for a maximum of 12 months, or earlier as indicated by the applicable credit rating document.
Omnia Holdings Limited participated in the rating process via face-to-face management meetings, telephonic communication and other written correspondence. Furthermore, the quality of information used to determine the ratings was considered adequate and has been independently verified where possible.
The credit ratings have been disclosed to Omnia Holdings Limited.
The information received from Omnia Holdings Limited and other reliable third parties to accord the credit ratings included:
- SENS announcements in respect of the trading update and collaborative engagement with funders (dated 20/03/2019 and 23/04/2019 respectively).
The ratings above were solicited by, or on behalf of, the rated client, and therefore, GCR has been compensated for the provision of the ratings.
GLOSSARY OF TERMS/ACRONYMS USED IN THIS DOCUMENT AS PER GCR’S CORPORATES GLOSSARY
|Cash Flow||The inflow and outflow of cash and cash equivalents. Such flows arise from operating, investing and financing activities.|
|Credit Rating||An opinion regarding the creditworthiness of an entity, a security or financial instrument, or an issuer of securities or financial instruments, using an established and defined ranking system of rating categories.|
|Debt||An obligation to repay a sum of money. More specifically, it is funds passed from a creditor to a debtor in exchange for interest and a commitment to repay the principal in full on a specified date or over a specified period.|
|Gearing||With regard to corporate analysis, gearing (or leverage) refers to the extent to which a company is funded by debt and can be calculated by dividing its debt by shareholders’ funds or by EBITDA.|
|Liquidity||The speed at which assets can be converted to cash. It can also refer to the ability of a company to service its debt obligations due to the presence of liquid assets such as cash and its equivalents. Market liquidity refers to the ease with which a security can be bought or sold quickly and in large volumes without substantially affecting the market price.|
|Long-Term Rating||A long-term rating reflects an issuer’s ability to meet its financial obligations over the following three to five-year period, including interest payments and debt redemptions. This encompasses an evaluation of the organisation’s current financial position, as well as how the position may change in the future with regard to meeting longer term financial obligations.|
|Margin||A term whose meaning depends on the context. In the widest sense, it means the difference between two values.|
|National Scale Rating||The national scale provides a relative measure of creditworthiness for rated entities only within the country concerned. Under this rating scale, a ‘AAA’ long term national scale rating will typically be assigned to the lowest relative risk within that country, which in most cases will be the sovereign state.|
|Rating Watch||Indicates that a rating is under review for possible change in the short term and the movement may be either positive or negative.|
|Short-Term Rating||A short-term rating is an opinion of an issuer’s ability to meet all financial obligations over the upcoming 12-month period, including interest payments and debt redemptions.|
For a detailed glossary of terms please click here