Credit agencies Fitch and Standard & Poor’s have altered their rating for Giti Tire Pte. Ltd.
According to Fitch’s latest assessment, "Giti’s liquidity is likely to remain strained over the next 12 months because of substantial cash outflows despite the refinancing of the company’s notes."
The agency went on to explain that it believes the China-based tire manufacturer’s “headroom under the maintenance covenants of its new club loan is thin.” As a result it lowered its corporate credit rating on Giti to ‘B-‘ from ‘B’ and its Greater China scale credit rating to ‘cnB-‘ from ‘cnBB-‘.
At the close of its rating statement Fitch added: “We removed the ratings from CreditWatch, where they were placed with negative implications on June 9, 2011. The outlook is negative.”
Meanwhile Standard & Poor’s Ratings Services said that its rating on Giti group’s Indonesian operation, PT Gajah Tunggal Tbk, is “unaffected by the downgrade” of Giti Tire Pte. Ltd. “We do not expect liquidity pressure at Giti to affect our assessment of Gajah Tunggal’s liquidity. Further, we do not anticipate that Gajah Tunggal will distribute exceptional dividends to its shareholders. Our liquidity assessment for the company factors in total dividend distributions of about 50 billion Indonesian rupiah in 2012.
According to S&P, Giti owns about 49.7% of Gajah Tunggal’s shares and has some influence over the company’s financial policy. Giti contributed less than 5% of Gajah Tunggal’s net sales for the six months ended June 30, 2011, the credit agency said. (Tyres & Accessories)
