Fitch rates Central Finance proposed senior debt ‘A+’

Fitch Ratings has assigned Central Finance Company PLC’s (CF, A+(lka)/Stable) proposed listed senior unsecured redeemable debentures of up to Rs. 2 billion an expected national long-term ‘A+(lka)(EXP)’ rating. The agency will assign a final rating to the issue subject to the receipt of final transaction documents conforming to information already received.

The issue is expected to have a tenor of between three to five years, with fixed-rate coupons. CF expects to utilise the issue proceeds to fund its balance-sheet growth. The issue will help reduce CF’s interest-rate risk by reducing its maturity mismatches.   The proposed debentures are rated in line with CF’s national long-term rating of ‘A+(lka)’, as they will rank equally with the company’s senior unsecured creditors.

CF’s ratings factor in its strong franchise and capitalisation, supported by robust profitability and its 55-year operating history.  CF is one of the largest licensed finance companies (LFCs) holding 13% of the sector’s assets as at end-2011.

An upgrade of CF’s rating is contingent upon greater product and funding diversity together with increased funding flexibility commensurate with higher category peers. Conversely, a sustained weakening in capitalisation due to deterioration in asset quality impacting profitability could result in a downgrade.

Established in 1957, CF is 21.9% held by the Wijenaike family – the founders of the company. Corporate Service Pvt. Ltd. holds a further 16.11% and the remainder is publicly held.