Fitch places SML on 'Rating Watch Positive'

Fitch Ratings Lanka Ltd., has placed Seylan Merchant Leasing PLC's (SML's) National Long-term rating of BB+ (lka) on Rating Watch Positive (RWP), consequent to the announcement of an intended take-over of the company by People's Leasing Company (PLC).

The two companies signed a Non Disclosure Agreement on March 6 to explore the possibility of divesting a controlling stake in Seylan Merchant Leasing to People's Leasing Company Ltd.

In a Rating Action Commentary, Fitch Ratings said the RWP indicates that SML's rating could potentially be upgraded or affirmed if PLC were to acquire a controlling stake from SML's majority shareholder Seylan Merchant Bank PLC (SMB).

"SML is likely to benefit from PLC's support post-acquisition, given the strategic importance of SML's Registered Finance Company licence to PLC," Fitch Ratings said.

"The licence will enable PLC to access customer deposit funding, thereby broadening its funding avenues, which are currently dependent upon institutional borrowings."

Welcoming the RWP on SML's Long-term rating, the company's Deputy Chairman Rohan Senanayake said "It is clear that the proposed acquisition by People's Leasing Company of a controlling stake in SML will be beneficial to both companies and to their depositors. We view this transaction as a very positive development for SML's future."

Seylan Merchant Leasing PLC was incorporated on July 31, 2000 and granted a licence to act as a finance company registered by the Monetary Board of the Central Bank of Sri Lanka in terms of Section 2 of the Finance Companies Act No 78 of 1988 on March 1, 2007.