The rating reflects fully guaranteed structure of the LKR ~500 million, zero-coupon, debentures issued by GSCL. The debentures are fully guaranteed by George Steuart Health (Pvt) Ltd. (GSHPL), rated "A" (single A), and covers both principal and interest. The guarantee strengthens the credit profile of the debentures, highlighting GSHPL’s strong balance sheet relative to other Group entities, with full recourse to George Steuart & Company. The debenture proceeds were disbursed to GSHPL as a return of funds that GS & Co had previously borrowed in 2022 and 2024 to support certain Group subsidiaries. The rating also incorporates GSHPL’s current financial profile and compliance with certain covenants to ensure enough cushion in its cashflows to meet guaranteed obligations. The covenants include (i) Leverage Ratio not exceeding 40.0% (ii) Interest Coverage Ratio maintained at 6.0x (iii) Debt Coverage Ratio maintained at 2.0x.
As of 1HFY26, GSHPL’s leverage (~16.4%), interest coverage (19.1x), and debt coverage (11.6x) remain well above the minimum thresholds stipulated in the guaranteed agreement. Additionally, monitoring liquidity and potential restrictions on dividend payments further mitigate the downside risks.
The rating is contingent on sustained performance of GS Group and, in turn, the holding company. Additionally, GSHPL's ability to maintain strong financial management, sustainable leverage, adequate debt coverage and adherence to the agreed covenants is critical for the rating. Any revision in GSHPL’s (guarantor) rating will have a direct impact on the debenture rating.