Fitch affirms Central Finance
Rates CP 'F1(lka)' :
Fitch Ratings Lanka has affirmed Central Finance Company Plc's (CF)
National Long-Term rating at `A+(lka)' and its subordinate debt rating
at `A(lka)'. The outlook is stable. Simultaneously, Fitch has assigned a
national short-term rating of `F1(lka)' to CF's proposed Rs 500 million
commercial paper (CP) issuance. CF retains the option of issuing up to
Rs 1.0 billion in the event of oversubscription.
CF's rating factors in its relatively good financial profile in the
Registered Finance Company (RFC) sector in Sri Lanka. The rating also
takes into account CF's lack of product and funding diversity in
relation to banks (an inherent limitation of the RFC business model).
An upgrade of CF's rating is contingent upon increased diversity of
its funding sources and access to capital markets commensurate to
`AA(lka)'-rated peers, as well as upon strengthening of its core
business franchise, while sustaining healthy asset quality and
profitability. Conversely, a downgrade may occur if there is a sustained
weakening of CF's asset quality or profitability.
The National Short-Term rating of CF's proposed commercial papers
reflects its reasonably sound funding and liquidity profile underpinned
by its conservative management of interest rate mismatches, as well as
its access to reliable bank credit facilities. Fitch notes the
availability of unutilized committed facilities for 5.4x the principal
outstanding of the proposed commercial paper issuances. The `F1(lka)
rating is linked to CF's National Long-term rating of 'A+(lka)'/Stable,
and would be affected by changes to the latter.
CF's internal capital generation remains strong, with equity/assets
at 23.6% at H112 (FYE11:24.0%). Its profitability and capitalization
ratios were at the higher end of the sector. CF was established as a
private company in 1957, and listed on the Colombo Stock Exchange in
1969. An Employees Share Option Plan holds 17.4% of its shares and 21.9%
are held by the Wijenaike family. CF's asset base was
Rs 44 billion at H112, with a network of 57 branches.
CF has an 1.79% equity stake in Fitch Ratings Lanka Ltd. No
shareholder other than Fitch, Inc. is involved in the day-to-day rating
operations of, or credit reviews undertaken by, Fitch Ratings Lanka Ltd.
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