Fitch places Abans Finance’s ‘BB+(lka)’ rating on Rating Watch Evolving

Oct 07, 2020 (LBO) – Fitch Ratings has placed Abans Finance PLC’s (AFP) National Long-Term Rating of ‘BB+(lka)’ on Rating Watch Evolving (RWE).

This follows AFP’s announcement on the Colombo Stock Exchange on 29 September 2020 that Softlogic Capital PLC (SC) will acquire 49.67% of AFP from Abans PLC – AFP’s parent – and then amalgamate with SC’s majority-owned Softlogic Finance PLC.

AFP’s rating is driven by our expectation of support from Abans PLC until the acquisition is completed.

KEY RATING DRIVERS

The RWE reflects Fitch’s view that AFP’s rating could be upgraded, downgraded or remain the same, depending on our assessment of the ability and propensity of its new ultimate parent – Softlogic Holdings PLC (SH) – to support the surviving entity, Softlogic Finance PLC, or the standalone credit strength of the surviving entity. Currently, AFP’s rating on a standalone basis would be below ‘BB+(lka)’.

Post-acquisition, we expect SC to make a mandatory offer to the minority shareholders of AFP after which it is likely to have a shareholding in excess of 49.67% in AFP. Immediately after the completion of the mandatory offer, SC intends to amalgamate AFP in to Softlogic Finance PLC, a 73.05%-owned subsidiary of SC, and as such AFP will cease to exist. The rating watch will remain until the conclusion of the transaction and the resolution will be dependent on access to additional information.

RATING SENSITIVITIES

Fitch expects to resolve the Rating Watch on completion of the sale with the potential for the watch to be extended if Fitch is able to get more clarity on the ability and propensity of the new ultimate parent, SH, to support the surviving entity and the standalone credit strength of the surviving entity.

When assessing support, we would factor in the credit strength of the main shareholder as well as assess its willingness to provide extraordinary support in times of need.

Fitch will remove the RWE if the transaction does not proceed. The rating would then remain driven by support from Abans PLC.

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

AFP’s rating is driven by support from Abans PLC.