Sri Lankan companies facing higher borrowing costs: Moody’s

ECONOMYNEXT – Sri Lankan companies face higher borrowing costs owing to a rise in benchmark interest rates, rating agency Moody’s Investors Service said.

Banking sector asset risks will increase after excessive credit expansion in the last two years and a rise in borrowing costs, Moody’s said in a new report on Sri Lankan banks.

“Nonperforming loan (NPL) ratios have risen, and corporates are facing higher borrowing costs due to a rise in benchmark interest rates.”
Moody’s said corporates’ debt serviceability will be weakened by higher interest rates.

“Higher interest rates will hurt corporates’ repayment ability.”

Around 40% of corporates will have debt interest coverage ratios of less than 2 under a stressed scenario, the rating agency said, noting that higher interest rates have begun to pressure borrowers.
(COLOMBO, 07 September, 2018)

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