Fitch Ratings has downgraded Sri Lanka’s Lion Brewery (Ceylon) PLC’s National Long-Term Rating to ‘A+(lka)’ from ‘AA-(lka)’. The Outlook is Negative. The agency has also downgraded the National Long-Term Rating on Lion’s outstanding senior unsecured debentures to ‘A+(lka)’ from ‘AA-(lka)’.
The downgrade reflects Fitch’s expectations that Lion’s net leverage, defined as lease-adjusted debt net of cash, operating EBITDAR, is unlikely to fall below 2.0x over the next three years due to lower beer sales from the higher taxes imposed over the last 18 months.
“We do not expect Lion’s EBITDA to recover to historical levels over the same period. The negative outlook reflects the potential for further downgrades should Lion’s sales volume not recover enough in the next 18 months to reduce leverage to less than 3x.”
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