Fitch Ratings has affirmed Tunisia-based construction group Servicom’s National Long- and Short-term and senior unsecured ratings at ‘B(tun)’ and removed them from Rating Watch Negative (RWN). A Stable Outlook has been assigned. The outstanding bond rating was also affirmed at ‘B(tun)’.
The removal of the RWN on Servicom follows the successful completion of the capital increase in May 2014, raising TND20m of new equity. The equity issue should significantly improve Servicom’s capital structure, restoring the group’s leverage to a Fitch forecast of 3.8x at FYE14. The management intends to use the funds to reduce debt and to fund capital expenditure.
The TND20m new equity was raised via the Tunis Stock Exchange (TND10m) and the equity sponsor, Tuninvest (TND10m), as opposed to the original plan of funding the equity issue with bank debt raised at Servicom Holding SA level. Fitch acknowledges that this decision alleviates pressure on Servicom’s liquidity, further supporting the removal of the RWN.
The Stable Outlook reflects Fitch’s view that the issue proceeds will allow Servicom to improve liquidity and deleverage to levels more compatible with its ratings. According to 2013 management accounts, funds from operations (FFO)-adjusted leverage peaked at 5.4x in 2013, a level considered high for the current ratings. Despite some slowdown in construction activity in 2014, Fitch expects the group to record some growth, due to its geographic expansion.
