Retail Capital retains its national BB+ credit rating despite Covid-19
Retail Capital, a leading and first Merchant Cash Advance provider in the South African SME market, has retained its national BB+ credit rating from the Global Credit Rating (“GCR”) agency.
Despite a downgrade in the sovereign rating of the South African Economy, which was hit even harder by Covid-19, the local small and medium enterprise (SME) financier has retained its national BB+ credit rating while its international rating has dropped by one notch to B- in line with South Africa’s credit downgrade in March, both ratings have a stable outlook.
Local and international investors remain confident to place more funding with the lender which will ultimately be extended into the hands of South African SMEs that need it. The business continues to have a strong balance sheet, adequate funding, and liquidity. The financier has adequate capital to see it through the Covid-19 crisis.
The credit report notes Retail Capital’s high exposure to SMEs, who had been significantly affected by the shutdown. “90% of the SMEs in consumer facing businesses, such as restaurants and hospitality, and, as such, the vast majority of the SMEs were not allowed to trade in April during Alert Level 5 of lockdown”. Recognising the effects of the lockdowns on the economy, the government has made the decision to place the country on lower Alert Levels faster than anticipated and about 90% of Retail Capital’s clients have started to legally trade under the Alert Level 2 of national lockdown.
This is having a direct impact on collections. Collections remain at similar levels to July, if not slightly higher and are expected to increase over the coming weeks.
In funding news – Verdant Capital has arranged a ZAR 110 million international funding line for Retail Capital, subject to approvals by the South Africa Reserve Bank. Verdant Capital continues to advise Retail Capital on its capital raising efforts.
Sources: Dept of Health Republic of South Africa, Global Credit Rating and Retail Capital (Pty) Limited