(The following statement was released by the rating agency)
COLOMBO, February 18 (Fitch)
Fitch Ratings has assigned Singer Finance (Lanka) PLC's (SFL; BBB(lka)/Stable) proposed listed senior secured debentures of up to LKR1.5bn an Expected National Long-Term rating of 'BBB(lka)(EXP)'.
The proposed issuance is expected to have a tenor of five years with a fixed-rate coupon. SFL expects to use the proceeds to fund lending growth, lengthen maturities of its liabilities, and reduce structural maturity mismatches. The debenture is secured by a primary mortgage over receivables from identified hire-purchase and lease agreements exceeding 110%of the total outstanding value of the debenture at any given time. Being a secured debenture, SFL will be omitted from the enhanced statutory liquid assets requirement. This is in contrast to unsecured borrowings for which SFL will need to post a 10% minimum reserve with the central bank if not included in the company's capital funds. Fitch will assign a final rating to the issue subject to the receipt of final transaction documents conforming to information already received.
KEY RATING DRIVERS
The issue has been rated at the same level as SFL's National Long-Term rating. Fitch has not provided any rating uplift for the collateralisation as the secured notes' recovery prospects are considered to be average and comparable with those of the unsecured notes in a developing legal system. SFL's rating reflects Fitch's view that support would be forthcoming from its parent, Singer (Sri Lanka) PLC (SSLP; 'A-(lka)'/Stable) if needed, given its strategic importance to SSLP. This view is premised on: the common Singer brand; SSLP's majority shareholding; board representation; the financing by SFL of some of SSLP's products; and demonstration past support in the form of equity injection and borrowings. SFL's National Long-Term Rating is underpinned by its standalone credit profile which reflects better capitalisation levels, modest profitability and satisfactory asset-quality when compared with similarly rated domestic peers.
RATING SENSITIVITIES
Any changes to SFL's National Long-Term rating would impact the issue's rating. As such, the issue rating is sensitive to changes to Fitch's view on SSLP's ability and propensity to provide support to SFL. A weakening in SFL's intrinsic strength would only trigger a downgrade of its National Long-Term rating if Fitch's support assessment were to change at the same time. Fitch believes that an upgrade for SFL would most likely result from a significant increase in SFL's strategic importance to SSLP. The development of SFL's franchise, while maintaining its financial profile relative to higher-rated peers, could also lead to a positive rating action.
Contact:
Primary Analyst Dilranie Mudannayake Analyst +94 112541900 Fitch Ratings Lanka Limited Level15-04, East Tower, World Trade Center, Colombo 01, Sri Lanka
Secondary Analyst Shyamila Serasinghe Analyst +94 112541900
Committee Chairperson Sabine Bauer Senior Director +852 2263 9966
Media Relations:
Bindu Menon, Mumbai, Tel: +91 22 4000 1727, Email: bindu.menon@fitchratings.com; Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com.
Note to editors:
Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(lka)' for National ratings in Sri Lanka. Specific letter grades are not therefore internationally comparable. Additional information is available at www.fitchratings.com. Applicable criteria, 'Global Financial Institutions Rating Criteria', dated 31 January 2014, 'National Scale Ratings Criteria', dated 30 October 2013, 'Finance and Leasing Companies Criteria' dated 11 December 2012 , 'Rating FI Subsidiaries and Holding Companies Criteria, dated 10 August 2012, and 'Evaluating Corporate Governance', dated 12 December 2012 are available at www.fitchratings.com.
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