NAIROBI, Kenya Feb 15 – Mumias Sugar Company says a good credit rating will give it the impetus to investment, as the firm eyes government owned sugar mills which are due for privatisation.
Speaking after receiving the credit rating, Chief Financial Officer Peter Kebati say Global Credit Rating (GCR) analysis shows the company is financially stable. It also signals the company\’s admirable liquidity factors, resulting in high and timely repayments to creditors.
"The way this ratings are undertaken, it looks at the world situation, it looks at the regional situation, and it looks at the industry and it looks at the company. Taking all of those factors into consideration, we have got a very high investment. Cash flow is still good. Our debt ratio and gearing ratios for our industry are reasonable. So this rating enables us to raise additional capital," Mr Kebati said.
He added that the company was on track with their project of the ethanol production plant which is due to be ready by January 2012.
"With this kind of rating we are now able to raise additional capital, whether it is additional share capital or additional debt capital which can be either corporate bonds or commercial paper etc. This gives us a good basis to start in terms of looking for additional funding to be able to make certain acquisitions," he said.
GCR accords both local currency national scale ratings (which are tiered against an assumed "best possible" rating of AAA and enable appropriate differentiation of credit quality within each country), as well as international scale ratings (which are tiered against US government risk, incorporate all sovereign risk and currency conversion issues, and are thus directly comparable across all countries).
The role of a rating agency is to independently differentiate credit quality across all industry sectors and investment instruments, with the purpose of providing investors with the information on which to base appropriate investment and pricing decisions. Accordingly, a formal rating provides an independent and internationally recognized measurement of an organization\’s financial strength.
A favourable rating can immediately result in an increased pool of investors, can facilitate direct access to capital markets and can ultimately result in reduced funding costs. Furthermore, the extensive distribution of the detailed rating report can prove to be a highly effective complement to an organisation\’s own investor relations activities.
Finally, quite apart from the rating, the process provides a useful management tool insofar as it provides management with the benefit of a knowledgeable, independent, third party opinion on the organisation and its operations (including the results of an extensive "benchmarking" process across a wide range of financial, operational and control variables).
Follow the author at https://twitter.com/d2_ndegwa