Loan Risk

Dec 22, 2011 (LBO) – A new Sri Lankan law to expropriate certain businesses has prompted RAM Ratings to put Bimputh Lanka on ‘Rating Watch’ with a negative outlook while confirming the microfinance firm’s BB/NP ratings. Concerns arose over Bimputh’s exposure through cultivation loans given to sugar cane growers of Sevanagala Sugar Industries, which is earmarked for expropriation, with both firms part of the Daya Group, a family-held concern with diversified operations focusing on the eastern region.

RAM Ratings Lanka said the ratings will be downgraded if Daya Group is unable to retain control of Sevanagala or the issue adversely affects Bimputh’s operations.

“On the other hand, the ratings may be reaffirmed (and the Rating Watch lifted) if the Daya Group successfully retains majority control of Sevanagala or there is a significant improvement in performance indicators.”

The full rating report follows:

RAM Ratings Lanka has reaffirmed Bimputh Lanka Investments PLC’s (Bimputh or the Company) respective long- and short-term financial institution ratings at BB and NP. Concurrently, the ratings have been put on Rating Watch (with a negative outlook). This is premised on our concerns over t