Poly Pet Company Limited

RATING DRIVERS

Supporting Factors

  • Strong market position as a leading plastic bottle manufacturer in Jamaica
  • Good operating efficiency underpinned by strong asset maintenance policies and practices

Constraining Factors

  • Deteriorating financial performance
  • High intercompany balances have limited cash flow accumulation
  • Downside risks associated with significant sovereign risk exposure to Jamaica
  • Increasing trend to limit the use of single-use plastic bottles represents an industry risk

Rating Sensitivity Factors

Factors that could, individually, or collectively lead to an improvement in the ratings and/ or Outlook include:

  • An increase in PAT of above 10% for 2 consecutive years
  • Improvement of the sovereign risk profile of Jamaica
  • 2 consecutive years or net reductions in intercompany balances by 10% or more, leading to improved cash flows and cash balances for Poly Pet

Factors that could, individually, or collectively lead to a lowering of the ratings and/ or Outlook include:

  • A greater than 10% decline in operating revenue for 2 consecutive years
  • A decline in interest cover to below 2 times
  • A net increase in intercompany balances by 5% over the next 12 months
  • A deterioration in the Company’s debt/ TNW ratio to more than 2 times
  • Breach of covenants stipulated in the final term sheet/prospectus for the bond offering
  • Inability to raise capital given the likelihood that the bond’s principal at maturity would need to be refinanced in 2025
  • Changes in environmental laws and regulations towards reducing plastic use in Jamaica
  • Deterioration in the sovereign risk profile of Jamaica
  • Material deviation of Poly Pet’s audited financial accounts for June 2020 from management accounts presented, resulting in lower profitability and cash flow adequacy metrics

COMPANY BACKGROUND

Poly Pet Company Limited (Poly Pet or the Company) is privately-owned, limited liability, manufacturing company founded in 2006 and located in Kingston, Jamaica. The Company’s primary manufacturing operations involve the production of high-density polyethylene (HDPE)[1] and polyethylene terephthalate (PET)[2] bottles of various sizes for household, beverage, and industrial use. The Company is owned by Anthony Brown (40%), Shane Brown (40%) (the current Chief Executive Officer), and Tamara Phang (20%).

The Company holds a market share of approximately 70% of the plastic bottle manufacturing industry in Jamaica. Over 90% of the Company’s customers are located across Jamaica, with a small distribution operation located in Barbados. Additionally, Poly Pet has successfully aligned itself with both local and international companies to provide complete packaging solutions including labels, boxes, and bottle caps. The Company is able also to design and manufacture bottles for its customers based on their unique specifications.

In December 2020, the Company issued a 5-year J $1 billion senior secured bond. To date, the Company has received J $800 million from investors. The initial proceeds of the bond were mainly used to refinance its bank debt under more flexible terms and to fund additional Working Capital requirements (Table 1). The balance of J $200 million is expected to be sold to additional investors in the 2nd half of 2021 and will be used to purchase new machinery and equipment to expand the Company’s product range and provide further working capital support.

 

Analytical Contacts:

Keith Hamlet
Tel: 1-868-627-8879 Ext. 229
E-mail: [email protected]

 Maxwell Gooding

Tel: 1-868-627-8879 Ext. 229
E-mail: [email protected]

Website: www.caricris.com

E-mail: [email protected]

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