Fitch rates Central Finance’s Senior Debt Final ‘A+’

Monday, 18 May 2015 00:00 - - {{hitsCtrl.values.hits}}

Fitch Ratings has assigned Central Finance Company Plc’s (CF; A+(lka)/Stable) issue of senior secured redeemable debentures of up to Rs. 3 b a final National Long-Term Rating of ‘A+(lka)’

The final rating is the same as the expected rating assigned on 8 April, and follows the receipt of documents conforming to information already received.

The debenture will have a maturity of between three to five years, carry a fixed-rate coupon, and will be listed on the Colombo Stock Exchange. CF expects to use the proceeds to fund lending growth, reduce structural maturity mismatches and diversify the funding mix.

Key rating drivers

The issue has been rated at the same level as CF’s National Long-Term Rating. Fitch has not provided any rating uplift for the collateralisation as the secured notes’ recovery prospects are considered to be average and comparable with those of the unsecured notes in a developing legal system.

CF’s rating reflects its strong capitalisation, which is supported by robust profitability and high profit retention. Counterbalancing these strengths are the pressure on loan quality and its low provisioning levels compared with its peers’. The rating also captures CF’s high margins, which are supported by the company’s strength in raising funds at relatively low rates through the solid franchise developed over a long operating history.

Rating sensitivities

The rating on the issue will move in tandem with CF’s National Long-Term Rating.