[South Africa] GCR suspends Educor Holdings issuer ratings
GCR Ratings has suspended Educor Holdings Proprietary Limited’s long and short term, national scale issuer ratings of B+(ZA) and B(ZA), Rating Watch Negative, and the international scale rating of B-, Rating Watch Negative, due to a lack of sufficient information to support the ratings.
The suspension follows the rating action taken in March 2019, on the back of a marked elevation in gearing, which led to certain covenant breaches. This significantly exacerbated liquidity and refinancing risk, especially as Educor did not have committed facility headroom to cover a potential acceleration of payment of the impacted facilities.
While management initiated refinancing plans early in the year, and had been engaging stakeholders to reduce debt to sustainable levels, it has not provided GCR with documentation to affirm finalisation or progress on these critical steps required to stabilise Educor’s credit risk profile. GCR’s concerns are also heightened by the recent churn in senior management, as well as the protracted external audit of its 2018 financial statements, which is still to be finalised.
In this regard, and in the absence of meaningful management participation in the ratings process since March 2019, GCR has suspended the ratings. While the change in GCR’s Framework and Criteria saw all issuer ratings placed ‘Under Criteria Observation’, GCR is unable to continue to support the ratings, as there is potential that the credit risk profile may have continued to fundamentally deteriorate, at a time where GCR is unable to carry out timely surveillance due to a lack of the requisite management participation.
GCR continues to engage Educor and its shareholders with a view to securing the requisite information and updating the ratings over a period of up to 90 days. Failure on management’s part to provide such information, however, may necessitate a withdrawal of the ratings.