Moody's upgrades Edcon debtors book
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Industrial Reporter
GENERAL goods retailer Edcon's management of its securitised debtors book got a boost from credit rating agency Moody's when it increased its rating on the book.
The improved rating meant Edcon got a 30% reduction in the discount rate on its debtors book, which it sold for R2,3bn to securitisation vehicle OntheCards in 2002.
The discount rate was offered on the sale of the book to offset the risk of its debtors. While OntheCards owns the book, the retailer still collected the money owed on it.
A retail analyst said the upgrade related to the more risky Class B notes of debt. The upgrade in its credit rating was a result of bad debt being lower than expected for this class of debt.
Edcon's debt management was so good it produced an income when it was expected to just break even, the analyst said. Edcon CE for group services Mark Bower said "this means that for accounts owned by OntheCards, collections have been higher and bad debts lower than expected. Cash flows to investors were considered more secure".
Class B notes, representing R200m and 9% of the total issue, jumped from Baa2 to A3. Class A notes, representing R1,73bn could not be upgraded as they were already at the highest level of Triple A. Moody's recently upgraded Edcon's own long-term corporate rating outlook from stable to positive. Edcon closed up 76c to R120,55.
Feb 26 2004 07:52:05:000AM Larry Claasen Business Day 1st Edition
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