Fitch Assigns Asia Asset Finance’s Proposed Senior Debt ‘A+(EXP)(lka)’ Rating

Fitch Ratings has assigned Asia Asset Finance PLC’s (AAF, A+(lka)/Stable) proposed Sri Lankan rupee-denominated senior unsecured debentures of up to LKR2 billion an expected National Long-Term Rating of ‘A+(EXP)(lka)’.

The proposed debentures are likely to have a maturity of five years and are to be listed on the Colombo Stock Exchange. The company plans to use the proceeds to support its loan book expansion. The final rating is subject to the receipt of final documentation conforming to information already received.

Key Rating Drivers

The proposed senior unsecured debentures are rated at the same level as AAF’s National Long-Term Rating in accordance with Fitch’s criteria. This is because the issue will rank equally with the claims of the company’s other senior unsecured creditors.

We affirmed AAF’s National Long-Term Rating at ‘A+(lka)’ with a Stable Outlook on 28 February 2025. The rating reflects our expectation that India-based Muthoot Finance Ltd (MFL, BB+/Stable) would provide extraordinary support to its 78.4%-owned subsidiary, if required. This view takes into account MFL’s ability to support AAF, underpinned by the parent’s standalone profile as India’s largest gold-backed lender. We also consider MFL’s majority shareholding in AAF, record of ordinary equity support and its strategic and operational alignment with AAF in gold-backed lending.

Even so, AAF’s strategic importance to MFL is constrained by its small size, modest group role, low contribution, limited brand sharing and operations in a different jurisdiction. AAF’s standalone credit profile does not drive its rating, but we assess it as significantly weaker than its support-driven rating.

See our commentary, Fitch Affirms Asia Asset Finance at ‘A+(lka)’; Outlook Stable, published February 2025, for details on AAF’s key rating drivers and sensitivities.

RATING SENSITIVITIES

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

A downgrade of AAF’s National Long-Term Rating would lead to a downgrade of the expected senior debt rating.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

An upgrade of AAF’s National Long-Term Rating would lead to an upgrade of the expected senior debt rating.

Date of Relevant Committee

27 February 2025

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

Public Ratings with Credit Linkage to other ratings

The expected senior unsecured debt rating is linked to AAF’s National Long-Term Rating, which is driven by support from the parent, MFL.