Fitch credit rating highlights in December 2010
Fitch affirmed Central Finance Company PLC’s (CF) National Long-term
rating at ‘A+(lka)’ on December 10, 2010. The agency has also assigned
an ‘A(lka)’ rating to CF’s proposed subordinated debt issue of Rs 500m
with a tenor of five years.
The Outlook is Stable. CF’s ratings factor in its relatively good
financial profile in the Registered Finance Company sector in Sri Lank
and CF’s lack of product and funding diversity in relation to banks (an
inherent limitation of the RFC business model).
On December 10, 2010 Fitch affirmed Senkadagala Finance Company
Limited’s (SFC) National Long-term rating at ‘BBB+(lka)’. The Outlook is
Stable. SFC’s rating reflects its long operating history and good
capital structure, as well as its relatively good credit control systems
and processes.
On December 15, 2010 Fitch downgraded Hayleys MGT Knitting Mills
PLC’s (HMGT) National Long-term rating to ‘BBB(lka)’ from ‘BBB+(lka)’,
and placed the Outlook on Negative.
The downgrade was driven by HMGT’s lower operating margins and the
company’s inability to increase sales prices in the face of
significantly increased cotton prices.
Fitch also noted that HMGT’s operations management could require
strengthening due to lapses in the debtor and inventory management
areas. HMGT’s rating could deteriorate further if margins and
performance do not improve in the near-term.
On December 15, 2010 Fitch affirmed Trade Finance and Investments
Ltd’s (TFI) National Long-term rating at ‘BB+(lka)’. The Outlook is
Stable. TFI’s rating factors in its high capitalization in terms of its
size of operations and good profitability. The rating is constrained by
TFI’s small asset base, limited product diversity, and narrow funding
base.
On December 15, 2010 Fitch affirmed Union Bank of Colombo Ltd’s (UB)
National Long-term rating at ‘BB+(lka)’ and revised the Outlook to
Stable from Positive.
UB’s rating reflects its moderate asset quality and lack of a broad
deposit base. The rating also takes into account the challenges to the
scalability of its operations and the impact to profitability given its
holding of a low-yielding deep-discount bond.
The outlook was revised to Stable from Positive, in consideration of
further time required by UB to implement the changes required in
existing systems to manage challenges of scalability of operations in
light of projected loan growth and branch expansion.
On December 15, 2010 Fitch upgraded the National Long-term rating of
Singer (Sri Lanka) PLC’s (Singer) senior unsecured notes to ‘A(lka)’
from ‘A-(lka)’.
The rating Outlook is Stable. The upgrade of SSP’s rating was driven
by its improved liquidity and credit metrics, as well as its improved
competitive position and revenue potential emanating from revised tariff
structures and opening of new geographical areas in the current post-war
environment. Fitch upgraded Singer Finance (Lanka) Limited’s (SFL)
National Long-term rating to ‘BBB+(lka)’ from ‘BBB(lka)’ on December 16,
2010.
The Outlook is Stable. The upgrade followed the upgrade of its
parent- Singer Sri Lanka PLC (SSP)’s - National Long-term rating to ‘A(lka)’/Stable
from ‘A-(lka)’/Stable, and reflects the increased level of support
assumed to be available from SSP and the perceived strategic importance
of SFL to its parent.
On December 29, 2010 Fitch affirmed the Housing Development Finance
Corporation Bank of Sri Lanka’s (HDFC) National Long-term rating at ‘BBB+(lka)’.
The outlook is stable. At the same time, the agency has affirmed the ‘BBB+(lka)’
rating on the bank’s outstanding Rs 195m senior unsecured redeemable
debentures.
HDFC’s ratings reflect its demonstrated ability to contain interest
rate risk to an extent by re-pricing existing loans, despite the
sizeable maturity mismatches between its assets and liabilities.
The ratings also factor in the State’s 51 percent ownership of the
bank, as well as HDFC’s perceived importance to low- and middle-income
housing, sizeable funds derived from the State and related entities, low
ultimate credit risk of its housing loans, and inherent limitations in
its current business model. |