Finance Rating

Dec 10, 2010 (LBO) - Fitch Ratings Lanka has confirmed Central Finance Company's (CF) National Long-term rating at 'A+(lka)' with a stable outlook, a statement said. CF's net interest margins improved to 13 percent in H111 largely due to an overall reduction in cost of funds. The agency has also assigned an 'A(lka)' rating to CF's proposed subordinated debt issue of 500 million rupees with a tenor of five years.

The subordinated debentures, in terms of priority, will rank below deposits and all senior debt obligations, but above ordinary and preference shares.

Consequently, and in accordance with the agency's criteria, it said the rating assigned for the subordinated debentures is one notch lower than CF's implied senior debt rating of 'A+(lka)'.

"CF's ratings factor in its relatively good financial profile in the Registered Finance Company (RFC) sector in Sri Lanka," the statement said.

"The ratings also take into account CF's lack of product and funding diversity in relation to banks, an inherent limitation of the RFC business model."

Fitch said an upgrade of CF's rating depends on increased diversity of its funding sources and access to