Fitch rates People’s Leasing’s Rs. 500m CP at ‘F1’

Fitch Ratings Lanka has assigned People’s Leasing Company Plc’s (PLC, ‘A+(lka)’/Stable) proposed commercial paper (CP) issue of up to LKR500m a ‘F1(lka)’ National Short-Term rating. This issue enhances the previous LKR1bn issuance which was rated ‘F1(lka)’ on 23 March 2012, taking the total issuance to LKR1.5bn.

This new issue will be utilised to finance PLC’s working capital and lending. The enhanced issue will increase PLC’s CP-funded assets to about 9% based on 31 March 2012 assets, compared with 7% as at end-December 2011.

PLC’s ratings reflect Fitch’s view that its parent, People’s Bank (PB, ‘AA(lka)’/Stable), is likely to extend support in a stressed scenario, if required. This view is underpinned by PB’s majority ownership of PLC (31 December 2011: 71.5%), common board representation, PLC group’s significant profit contribution to PB’s consolidated profile (end-September 2011: 36% of PB group profits), and the strong strategic and operational linkages between the companies.

An ‘F1(lka)’ category short-term rating indicates the strongest capacity for timely payment of financial commitments relative to other issuers or obligations in the same country. Under Fitch’s National Rating scale, this rating is assigned to the lowest default risk relative to others in the same country. Where the liquidity profile is particularly strong, a “+” is added to the assigned rating.