Secure Deal

Senkadagala Finance is coming out with a Rs. 52.4 mn debt paper backed by an A (sri) rating from Fitch Ratings Lanka.
The Rs. 52.4 mn issue is part of a larger Rs. 250 mn securitisation deal structured by Capital Alliance, says Senkadagala Managing Director, Lakshman Balasuriya.rn

rnThe Leased Backed Trust Certificates (LBTC) will be issued by a special purpose vehicle (SPV) called Senkadagala Finance Trust three, under the firms asset backed borrowing programme.rn

rnFitch says an A (sri) rating indicates a low expectation of credit risk, with a strong capacity to honour timely financial commitments. rn

rn”This capacity may, nevertheless, be more vulnerable to changes in circumstances or in economic conditions than is the case for higher ratings,” Fitch said Monday.rn

rnDeutsche Bank will act as trustees to the SPV. The Trust will finance the loan to Senkadagala by issuing LBTCs worth Rs. 52.4 mn. Senkadagala in turn, would continue to service the contracts.rn

rnThe LBTCs are backed by a pool of 104 lease contracts with a principal outstanding of Rs. 67.904 mn at the point of origination. rn

rn”The contracts have been originated to finance motor vehicles. All the leases are level pay fixed rate receivables, with average seasoning of 2.7 months, weighted average loan to value (LTV) of 69.8 percent and no delinquency at the point of origination of the trust.” rn

rnThe ratings of the LBTCs are based on the credit enhancement in the form of an average and minimum Debt Service Cover of 1.64 and 1.23 respectively, explains Fitch. rn

rnPrincipal over collateralisation in the form of asset cover stands at 23 percent at the beginning of the transaction. rn

rnIn order to maintain the collateral quality and cashflow cover, the transaction provides for replacement of leases which have prepaid or gone into a delinquency status of two months, every three months or whenever the principal of delinquent leases has risen above 2.5 percent of gross principal outstanding of the then existing aggregate lease principal. rn

rnThe transaction also incorporates a cash cover trigger, wherein excess cashflows are trapped in the reserve in case the debt service cover falls below 1.15, and requires that the balance of the lease principal always exceed the pool principal by 1.2 times. rn

rnBesides these protections, the trust has full recourse to Senkadagala, who is obliged to top up collections to meet any deficiency in meeting the investor payouts.rn

rnSenkadagala also carries a BBB+ (sri) rating for its unsecured senior debt. The firm is so far the only finance company to come out with its rating. Balasuriya says the credit rating has stood them well over the years enabling the firm to raise funds at much cheaper rates.rn

rn”As soon as we got a rating we were able to raise Rs. 100 mn Citibank. Thereafter we got Rs. 300 mn from Commercial Bank, Rs. 250 mn from HNB and Rs. 250 mn from Sampath Bank through securitisation,” Balasuriya said.rn

rnSenkadagala has so far lent Rs. 1.2 bn todate, but the going has been slow this year, as an election and a new government has slowed down borrowings.rn

rnHowever, Balasuriya is optimistic of issuing between Rs. 800 mn to Rs. 1 bn this year by way of new leases.rn

rnSenkadagala started off in 1968 and operates through an online real time branch network with four branches in Kandy, Colombo, Kurunegala and Negombo. The firm is in the process of extending its network, with four new branches scheduled to be opened in the major cities by end of the current financial year. rn

rnFitch Ratings Lanka Ltd is a joint venture between Fitch Ratings, USA, International Finance Corporation Washington, Central Bank of Sri Lanka and several other leading local financial institutions. rn

rnFitch Ratings, USA is one of the three global full service credit rating agencies and rates over 85 sovereign nations, 7,600 structured finance ratings, 2,900 international banks and financial institutions. rn

rnFitch Ratings Inc. has over 90 years experience in credit analysis and a combined analytical and professional staff of more than 1,400 many of whom possess over 10 years of specialised industry experience.rn


-LBO Newsdesk: LBOEmail@vanguardlanka.comrn

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