Fitch maintains MCSL on RWE

Fitch Ratings Lanka is maintaining Merchant Credit of Sri Lanka Ltd's (MCSL) National Long-Term 'BBB(lka)' rating on Rating Watch Evolving (RWE), pending its merger with Merchant Bank of Sri Lanka Plc (MBSL) and two subsidiaries of Bank of Ceylon (BOC; 'AA+(lka)'/Stable) .

The RWE reflects uncertainty surrounding the final details of the intended merger, the profile of the merged entity, and the resulting shareholding of state-owned BOC in the merged entity. BOC directly holds 72% of MBSL and 49% of MCSL. The Watch has been in place since May, when it was announced that the Central bank of Sri Lanka (CBSL) has provided "in principal approval" for the issuance of a specialised banking license to MBSL subject to the amalgamation.

MCSL's rating reflects its association with its main shareholder, BOC, in terms of its effective shareholding of 86% and representation on MCSL's board, and may be affected by a change in circumstances that would require a review of the likelihood of support from BOC.

MCSL is a registered finance company (RFC) that accounted for 1.9% of total RFC assets at end-2010. It has a network of 11 branches. The company is jointly held by BOC (49%) and MBSL (51%).