Finance Rating

May 22, 2014 (LBO) – Fitch has confirmed a ‘A+(lka)’ rating of Sri Lanka’s Melsta Regal Finance based on expected support from its parent, ‘AAA(lka)’ rated Distilleries Company of Sri Lanka. MRF has expanded quickly since it started commercial operations in October 2012 as part of DIST group and Fitch expects that it will continue to growth rapidly. Short-term debt factoring and working capital finance remain MRF’s core products, accounting for approximately 60% of advances in the financial year ending March 2014, with the remainder comprising mainly finance leases and hire purchase vehicle finance.

DIST’s ability to support MRF stems from its market leadership in the cash generative domestic alcoholic beverage sector, with profitability supported by relatively stable demand for spirits though economic cycles, and high entry barriers as a result of regulation.

RATING SENSITIVITIES

MRF’s rating may be downgraded if there is a change to DIST’s ability or propensity to provide support. This may stem from a downgrade of DIST’s National Long-Term rating, or weakening linkages between DIST and MRF.

Fitch may consider narrowing the notching between the two entities should synergi