Fitch Ratings has assigned Senkadagala Finance PLC’s (SFC: BBB+(lka)/Stable) issue of senior unsecured redeemable debentures of up to LKR3bn a final National Long-Term Rating of ‘BBB+(lka) ‘.
The final rating is the same as the expected rating assigned on 13 June 2016, and follows the receipt of documents conforming to information already received. The amount has been increased to LKR3bn from LKR2bn.
The debentures will have tenors of two to four years and carry fixed and floating coupons. The debentures are to be listed on the Colombo Stock Exchange and the company plans to use the proceeds to fund loan growth, diversify its funding mix and reduce structural maturity mismatches.
KEY RATING DRIVERS
The proposed debentures are rated at the same level as SFC’s National Long-Term Rating as they will constitute direct, unconditional, unsecured and unsubordinated obligations of SFC.
SFC’s rating reflects the satisfactory credit profile that it has maintained through economic cycles, its relatively strong franchise amongst finance companies in Sri Lanka and access to longer-term institutional funding. These are counterbalanced by its deposit franchise and capitalisation, which are weaker than higher-rated peers.
The rating on the proposed debentures will move in tandem with SFC’s National Long-Term Rating.
SFC’s rating could be downgraded if asset quality weakens, leading to a significant decline in capitalisation or excessive asset encumbrance. An upgrade of SFC’s rating is contingent upon maintenance of stronger capitalisation and a more robust deposit franchise that would allow the company to expand in a better controlled manner. (Media Release)