HNB mopped up Rs. 200 mn worth of securitised paper from People’s Leasing Co. locking returns up to four years

Hatton National Bank bought up Rs. 200 mn worth of securitised paper on Monday, locking returns for up to four-years. Hatton National Bank bought up Rs. 200 mn worth of securitised paper on Monday, locking returns for up to four-years. People’s Leasing Co. (PLC) issued the lease-backed securities to feed a growing appetite for leases and to diversify funding sources.

People’s Merchant Bank (PMB), who structured and place the issue said that HNB was comfortable to opt for a longer period, at a time when most buyers were looking to invest in short-term paper.

“It’s good for both sides in a scenario when no one takes a long term look. We also tweaked the model slightly by fixing the paper for the first two years and thereafter pricing it at two percent over the six month treasury bill rate,” explains Nandi Anthony Head of Corporate Finance & Capital Market PMB.

PLC CEO, D P Kumarage said that the funds would go towards expanding its lease portfolio.

PLC, has tapped the market many times to raise funds for its leasing portfolio. Kumarage says todate PLC has raised around Rs. 3 bn.

“In total we hope to raise around one and a half billion rupees this year,” Kumarage said.

Though PLC has State backing, prevailing high interest rates, makes it tough to raise funds.

“People want to lend to us at floating rates, its something we are not exactly comfortable with because we can only lend at fixed rates,” Kumarage says.

PLC also has an A (sri) rating from Fitch Ratings Lanka for a billion rupee securitisation programme. However, the rating did not figure in Monday’s issue.

Kumarage says there is more credibility for the company, when funds are raised outside a rated issue. But PLC is talking to a few financial institutions, mostly insurance, companies, who usually shop around for rated paper.

Three month risk free government treasury rates currently trade at around 7.30 percent and six month bills trade at 7.60 percent in the secondary market.

-LBO Newsdesk: LBOEmail@vanguardlanka.com