Fitch rates Singer Finance proposed senior debt BBB


Fitch Ratings has assigned Singer Finance (Lanka) PLC’s (SFL; BBB(lka)/Stable) proposed senior secured redeemable debentures of up to LKR1.5bn a final National Long-Term Rating of ‘BBB(lka)’.

A full list of existing ratings is at the end of this rating action commentary.

The assignment of the final rating follows the receipt of documents conforming to information already received, and the final rating is the same as the expected rating assigned on 15 February 2016.

The issue will have two tranches that have bullet principal repayments in the third and fourth years. The debentures carry a fixed-rate coupon paid semi-annually and they will be listed on Colombo Stock Exchange. SFL expects to use the proceeds to fund lending growth, lengthen maturities of its liabilities and reduce structural maturity mismatches.

The issue has been rated at the same level as SFL’s National Long-Term Rating. The debenture is secured by a primary mortgage over receivables from identified lease agreements. Fitch has not provided any rating uplift for the collateralisation as the recovery prospects are assessed as average and comparable to those of unsecured notes in a developing legal system. SFL is rated two notches below its parent, retailing company Singer (Sri Lanka) PLC (Singer; A- (lka)/Stable). This reflects Singer’s majority ownership in SFL, the common Singer brand and Singer’s influence on SFL’s strategic direction through representation on the finance company’s board. The twonotch differential also reflects SFL’s limited role in the group as SFL provides financing for only a low proportion of Singer’s sales.

SFL’s rating also reflects its standalone credit profile, its higher capitalisation levels compared with its peers amid modest loan growth, and its improved asset-quality metrics.

Any changes to SFL’s National Long-Term Rating would impact the issue’s National Long-Term Rating.

SFL’s rating may be upgraded if there is a significant increase in its strategic importance to Singer. A rating upgrade could also result if SFL is able to continue to maintain its capitalisation and asset-quality metrics at levels comparable to higher-rated peers while achieving a stronger franchise relative to its higher-rated peers.

A sustained deterioration in SFL’s standalone credit profile, capitalisation and asset quality relative to similarly rated peers would result in a downgrade of SFL’s standalone rating. A weakening in SFL’s intrinsic strength, however, would not necessarily trigger a downgrade of its National Long-Term Rating, unless Singer’s National Long-Term Rating or its propensity to support SFL were to weaken simultaneously.

A full list of SFL’s ratings follows:

National Long-Term Rating: ‘BBB(lka)’; Stable Outlook
Outstanding senior secured debentures: ‘BBB(lka)’
Outstanding senior unsecured debentures: ‘BBB(lka)’
Proposed senior secured debenture: ‘BBB(lka)’