Rating Cut

Mar 20, 2009 (LBO) – Sri Lanka’s The Finance Company (TFC) has lost its investment grade rating with a two notch downgrade to ‘BB+(lka)’ from ‘BBB(lka)’ with the rating placed on negative watch, Fitch Ratings said. A negative watch indicates that TFC’s rating could be downgraded further or affirmed.

The downgrade reflects the liquidity stresses faced by TFC due to adverse public perceptions on the Ceylinco Group. These perceptions are tied to the liquidity problems faced by, and subsequent collapse of, the Golden Key Credit Card Company Ltd (GK).

TFC and GK are both entities within the Ceylinco group, a large local conglomerate.

GK, a specialised credit card issuer, which faced liquidity stresses in order to repay “guaranteed return investments” to its customers, went into court administered insolvency in order to structure and implement a repayment schedule for investors, Fitch said.

GK is not regulated by the Central Bank of Sri Lanka (CBSL) and is not licensed to accept retail deposits.

TFC, however, is regulated by the CBSL as a registered finance company (RFC) and is monitored with respect to liquidity, capital adequacy, and asset quality, among other parameters.

The central b