Senkadagala Finance gets rating for upcoming debenture

Senkadagala Finance secured a BBB+ (sri) rating for its upcoming four-year debenture issue from Fitch Ratings Lanka. Senkadagala Finance secured a BBB+ (sri) rating for its upcoming four-year debenture issue from Fitch Ratings Lanka. The Rs. 250 million issue, which will be listed on the Colombo Stock Exchange, is priced at 14 percent.

Investors also have a choice of opting for a floating rate of 2.75 percent above the three month treasury bill rate (three month notes now trade at 9.22 percent). The floating rate note comes with a cap of 10 percent and a floor of 15 percent.

“In terms of priority, the debentures will be subordinated to the secured debt obligations of the company, but will rank on par with depositors,” Fitch Ratings said in a statement on Tuesday.

In accordance with Fitch Ratings Lanka’s criteria, the rating assigned for the Debentures is on par with Senkadagala’s long-term senior debt rating of ‘BBB+(sri)’.

The BBB+ (sri) long term rating indicates low expectation of credit risk and capacity to honour financial commitments on time. However, it is subject to changes in economic conditions.

Monies raised will help fund Senkadagala to expand its loan book and improve the asset-liability maturity matching. The firm’s portfolio grew by 53 percent during the financial year 2005, supported by its branch expansion programme.

Net interest margins remained healthy, while the company’s high degree of automation helped maintain operational efficiencies.

The ‘Cost/Income’ ratio rose marginally to 51 percent due to the branch expansion programme.

“Senkadagala’s operational efficiency compares well with peers, and is expected to improve with the future revenue flows. Overall, Senkadagala’s asset quality remains strong and healthy and compares well with peers.”

The overall return on assets (ROA) was 5.3 percent during the year and remains relatively high in comparison to its peers and in the local context.

During the financial year 2005, asset quality improved with non-performing loans (NPL) to gross loans falling to 2.5 percent as at March 2005, from 4.2 percent during the same period 2004.

The solvency ratio, (Net NPL/Equity ratio) improved to 7.2 percent from 15.2 percent as at March 2004.

Set up in 1968, Senkadagala’s core business lies in offering lease and hire purchase schemes for motor vehicles. The firm has a network of eight branches operating in Kandy, Colombo, Kurunegala, Negombo, Nugegoda, Panadura and Galle.

The branches are automated and linked via an online real time network, which facilitates centralised monitoring and control.

Fitch Ratings Lanka Ltd is a joint venture between Fitch Ratings, USA, International Finance Corporation Washington, Sri Lanka’s Central Bank.

-LBO Newsdesk: LBOEmail@vanguardlk.com