Singer Finance Lanka proposed debt issue rated ‘BBB(lka)’ final national long term rating: Fitch

May 27, 2015 (LBO) – Sri Lanka’s Fitch Ratings has assigned Singer Finance (Lanka) senior secured debt a final national long-term rating of ‘BBB(lka)’, the rating agency said in a statement.

The final rating is at the same level as the expected rating assigned on 18 February 2015, Fitch said.

On 21 May 2015, Singer Finance Lanka (SFL) signed the trust deed to issue up to LKR1.5bn of senior secured debentures. The proposed issuance will have a maturity of five years with bullet principal repayment at maturity.

Coupon payments will be at a fixed rate, and paid annually. SFL expects to use the proceeds to fund lending growth, lengthen maturities of its liabilities, and reduce structural maturity mismatches. The debentures are to be listed on the Colombo Stock Exchange.

KEY RATING DRIVERS
NATIONAL RATINGS AND SENIOR DEBT
The issue has been rated at the same level as SFL’s National Long-Term Rating. Fitch has not provided any rating uplift for the collateralisation as the secured notes’ recovery prospects are considered to be average and comparable with those of unsecured notes in a developing legal system.

SLFL’s rating reflects Fitch’s view that support would be available from its parent, Singer (Sri Lanka) PLC (Singer; A-(lka)/Stable), if needed. This view is based on Singer’s majority shareholding and board representation on SFL, the common Singer brand and a track record of support from Singer through equity injections and funding lines.

SFL’s National Long-Term Rating is underpinned by its standalone credit profile, which reflects better capitalisation levels, modest profitability and satisfactory asset-quality when compared with similarly rated domestic peers.

RATING SENSITIVITIES
NATIONAL RATINGS AND SENIOR DEBT
Any changes to Singer Finance (Lanka) PLC’s (SFL) National Long-Term Rating would impact the issue’s rating. As such, the issue rating is sensitive to changes to Fitch’s view on Singer (Sri Lanka) PLC’s (Singer) ability and propensity to provide support to SFL. A weakening in SFL’s intrinsic strength would only trigger a downgrade of its National Long-Term Rating if Fitch’s support assessment were to change at the same time.

Fitch believes that an upgrade for SFL would most likely result from a significant increase in SFL’s strategic importance to Singer. Positive rating action could also result if SFL develops its franchise, while maintaining its financial profile relative to higher-rated peers.