The agency said the downgrade reflected its continued concern over reduced group profitability, and losses incurred from the discontinuation of businesses, which exceeded the agency's expectations. A few months ago the transport and logistics group almost sank as a result of its debt burden and liquidity challenges.
There is speculation that if the downgrade had come earlier, the group would have been in trouble with its creditors, bondholders and shareholders.
The group has moved swiftly to repair its battered reputation by appointing Peter Mountford as new CEO.
A foreign logistics company has also come to the group's rescue, offering to recapitalise Super Group as long as the investor retains majority shareholder status.
Fitch said the negative outlook on Super Group reflected its view that challenging trading conditions due to the economic downturn was expected to continue over the next 12 to 18 months, adversely affecting Super Group's credit metrics in the short- to medium-term.
“The completion of its debt restructuring in 2009 and cash inflows from the R1bn underwritten rights offer should enhance Super Group's liquidity, leading to resolution of the Rating Watches,” Fitch said in a statement. It said the ratings were supported by shareholders and lenders, as demonstrated by a consortium of banks and the majority shareholder recapitalising the group, and the debt restructuring exercise which would lead to the repayment of unsecured debt.
Fitch said the ratings were further supported by the stable cash flows in Super Group's full maintenance lease and supply chain management businesses.
The group has embarked on a strategy of disposing of non-core operations, which include Autozone, Mica, Emerald Insurance and Hermans Truck.
Last month it sold its insurance business, Emerald Insurance, to short-term insurer Santam.
The deal is subject to approval by the Competition Commission and the registrar of short-term insurance.
It said last week it had reached an agreement in principle with a consortium of investors led by RMB Corvest, a member of the FirstRand Group, to dispose of AutoZone.
The disposals of Mica and Hermans Truck Accident Repairs were under way.
More asset sales were in the pipeline. The disposals and closures were expected to contribute to a loss of R1,12bn-R1,37bn for the financial year to June, the group said last month.
Super Group has warned that the restructuring may show an operational profit of R1m-R5m after taking into account higher borrowing costs, restructuring charges and the impairment of the carrying value of investments.
Source: Business Day
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