Fitch rates People’s Leasing Company’s proposed senior debt ‘A(lka)’

Fitch Ratings Lanka has assigned People’s Leasing Company Limited’s (PLC) proposed senior debentures of up to Rs. 750 m a National Long-Term rating of ‘A(lka)’. The issue is rated at the same level as PLC’s National Long-Term rating of ‘A(lka)’ which has a Stable Outlook. This is in compliance with Fitch’s rating criteria on senior unsecured bond instruments of financial institutions.

The proposed instrument will rank pari passu with PLC’s senior creditors. The debentures carry maturity options of between three and four years, and will be issued at a fixed interest rate, helping PLC to reduce interest rate mismatches between its assets and liabilities.

The ratings reflect PLC’s strong financial profile, which is in turn driven by its entrenched market share as Sri Lanka’s largest specialised leasing company (SLC), and its effective risk management systems and controls. The rating also derives comfort from People’s Bank’s 100% ownership (PB, ‘AA-(lka)’/Positive) of PLC. The latter carries out the entirety of PB’s incremental leasing business, and contributed to over 20% of PB’s consolidated post-tax profits at end-2010.

PLC’s total assets stood at Rs. 49 b as at end-2010, which amounted to a share of 13% of aggregate SLC and registered finance company sector assets. As of June 2011, the company had a branch network of 32 in addition to over 100 ‘window offices’ within PB’s extensive branch network, which has helped PLC to achieve considerable economies of scale relative to its competition.