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Fitch Affirms Ceylease Financial Services at ‘BB+(lka)’; off RWE
Fitch Ratings Lanka has affirmed Ceylease Financial Services Ltd’s (CFSL)
National Long-Term rating at ‘BB+(lka)’. The rating has been removed
from Rating Watch Evolving (RWE) and assigned a Stable Outlook.
The rating has been uplifted based on Fitch’s expectations of support
from CFSL’s parent, the state-owned Bank of Ceylon (BOC; ‘AA+(lka)’/Stable).
BOC has a 55% shareholding in CFSL, and is represented on the latter’s
board. Further, BOC continues to be a key creditor to CFSL, accounting
for 28% of its total borrowings at end-2011.
The removal of the RWE, which was placed on July 26, 2011 follows
Merchant Bank of Sri Lanka Plc’s (MBSL, 72% owned by BOC) March 15, 2012
announcement that it would not proceed with its proposed merger with
CFSL and other entities of the BOC group.
Fitch notes CFSL’s weak stand-alone financial profile. The company
mainly provides vehicle finance, in the form of leases (37.1%), hire
purchase (49.6% ) and loans (13.3%) at end-2011. During 2011, the
company wrote off LKR104m of non-performing loans (NPLs) that were fully
provided. Consequently, its NPL ratio declined sharply to 15.4% over
three months in arrears and 6.9% over six months in arrears at end-2011
from 25.1% and 13%, respectively, in end-2010. |