PMFC's ratings upgraded to BBB-/P3

RAM Ratings Lanka has upgraded People's Merchant Finance Company Ltd's ("PMFC" or "the Company") long-term financial institution rating by four notches, from B+ to BBB-, with a stable outlook, a media release from the company said.

Its short-term rating has also been revised from NP to P3. Concurrently, the Rating Watch (with a developing outlook) on PMFC's rating has been lifted.

The steep upward revision of the Company's ratings is premised on the financial flexibility derived from its new ultimate, state-owned parent, People's Bank ("PB" or "the Bank").

PMFC is a small registered finance company ("RFC") that falls within the regulatory purview of the Central Bank of Sri Lanka ("Central Bank"); the Company had an asset base of Rs. 299.67 million as at end-March 2009.

In March 2009, People's Merchant Bank PLC ("PMB") acquired 44.02 percent of PMFC. About three months later, PMB raised its stake to 99.90 percent, and renamed the Company as PMFC.

In mid-October, PMB intended to amalgamate the assets and liabilities of PMFC by FYE 31 March 2010 ("FY Mar 2010"). PMB is an associate company of the People's Bank (which owns a 39.20 percent stake), the second largest commercial bank in Sri Lanka.

PMB's shares are listed on the Colombo Stock Exchange. PMB is a small specialised leasing company ("SLC"), with an asset base of Rs. 2.84 billion; it too comes under the regulatory umbrella of the Central Bank.

PMB's largest funding source is its ultimate parent, PB. As at end-March 2009, the Bank had extended Rs. 660 million of facilities to PMB; this accounted for approximately 45 percent of the latter's bank borrowings.