Midroog lowers the bond rating (Series A and Series C) issued by Kerso Motors, from Aa3.il to A1.il and changes the rating horizon from negative to stable. Midroog also downgraded the discounted bonds (Series B) from A1.il to A2.il and changes the rating horizon from negative to stable.
The main considerations for lowering the rating are an erosion in the company’s business position, which is reflected in a decrease in the company’s revenues and market share, which fell from 11.9% in 2018 to 9.3% in 2019. Midroog estimates the decline in market share . Midroog also predicts that this situation is unlikely to change in the short to medium term.
Carasso is characterized by imports of Renault and Nissan models, the company acquired Kal-Otto in May 2020 to establish its position in the leasing industry. In Midroog’s estimation, the strategic move makes the company a significant player in the leasing industry, but this industry is characterized by a high business risk together with the company’s core business and therefore there has been a certain increase in business risk.
Midroog also estimates a 20% to 30% drop in private vehicle dedication in 2020 resulting from the Corona crisis. Also in 2021 some recovery is expected, but the level of dedication will remain relatively low for the period before the corona.
Midroog estimates that the company’s debt volume will continue to grow, given the increase in working capital in 2020 resulting from an increase in inventory days and customer days. Accordingly, the ratio of financial debt coverage to EBITDA is expected to range from 8-9 in 2020, and improve to 5-6 in 2021, with this volatility mainly due to changes in working capital needs.
“The high volatility in working capital needs is a negative factor in the company’s liquidity profile, similar to trading companies and car importers in particular, but the company’s access to sources of financing is estimated by us to be high due to a significant volume of operations and high marketability of inventory. The company does not have significant bank credit facilities and a repayment schedule with a convenient layout. “Midroog noted
Continuation of the company’s business position, which will be reflected in an increase in market share, and a decrease over time in the ratio of financial debt to EBITDA, can lead to an increase in ratings.
Your response has been received and will be published subject to system policies.
For a new response
Your response was not sent due to a communication problem, please try again.
Return to comment