Tuesday, February 1, 2011

Fitch credit rating highlights in December 2010

Fitch affirmed Central Finance Company PLC’s (CF) National Long-term rating at ‘A+(lka)’ on December 10, 2010. The agency has also assigned an ‘A(lka)’ rating to CF’s proposed subordinated debt issue of Rs 500m with a tenor of five years.

The Outlook is Stable. CF’s ratings factor in its relatively good financial profile in the Registered Finance Company sector in Sri Lank and CF’s lack of product and funding diversity in relation to banks (an inherent limitation of the RFC business model).

On December 10, 2010 Fitch affirmed Senkadagala Finance Company Limited’s (SFC) National Long-term rating at ‘BBB+(lka)’. The Outlook is Stable. SFC’s rating reflects its long operating history and good capital structure, as well as its relatively good credit control systems and processes.

On December 15, 2010 Fitch downgraded Hayleys MGT Knitting Mills PLC’s (HMGT) National Long-term rating to ‘BBB(lka)’ from ‘BBB+(lka)’, and placed the Outlook on Negative.

The downgrade was driven by HMGT’s lower operating margins and the company’s inability to increase sales prices in the face of significantly increased cotton prices.

Fitch also noted that HMGT’s operations management could require strengthening due to lapses in the debtor and inventory management areas. HMGT’s rating could deteriorate further if margins and performance do not improve in the near-term.

On December 15, 2010 Fitch affirmed Trade Finance and Investments Ltd’s (TFI) National Long-term rating at ‘BB+(lka)’. The Outlook is Stable. TFI’s rating factors in its high capitalization in terms of its size of operations and good profitability. The rating is constrained by TFI’s small asset base, limited product diversity, and narrow funding base.

On December 15, 2010 Fitch affirmed Union Bank of Colombo Ltd’s (UB) National Long-term rating at ‘BB+(lka)’ and revised the Outlook to Stable from Positive.

UB’s rating reflects its moderate asset quality and lack of a broad deposit base. The rating also takes into account the challenges to the scalability of its operations and the impact to profitability given its holding of a low-yielding deep-discount bond.

The outlook was revised to Stable from Positive, in consideration of further time required by UB to implement the changes required in existing systems to manage challenges of scalability of operations in light of projected loan growth and branch expansion.

On December 15, 2010 Fitch upgraded the National Long-term rating of Singer (Sri Lanka) PLC’s (Singer) senior unsecured notes to ‘A(lka)’ from ‘A-(lka)’.

The rating Outlook is Stable. The upgrade of SSP’s rating was driven by its improved liquidity and credit metrics, as well as its improved competitive position and revenue potential emanating from revised tariff structures and opening of new geographical areas in the current post-war environment. Fitch upgraded Singer Finance (Lanka) Limited’s (SFL) National Long-term rating to ‘BBB+(lka)’ from ‘BBB(lka)’ on December 16, 2010.

The Outlook is Stable. The upgrade followed the upgrade of its parent- Singer Sri Lanka PLC (SSP)’s - National Long-term rating to ‘A(lka)’/Stable from ‘A-(lka)’/Stable, and reflects the increased level of support assumed to be available from SSP and the perceived strategic importance of SFL to its parent.

On December 29, 2010 Fitch affirmed the Housing Development Finance Corporation Bank of Sri Lanka’s (HDFC) National Long-term rating at ‘BBB+(lka)’. The outlook is stable. At the same time, the agency has affirmed the ‘BBB+(lka)’ rating on the bank’s outstanding Rs 195m senior unsecured redeemable debentures.

HDFC’s ratings reflect its demonstrated ability to contain interest rate risk to an extent by re-pricing existing loans, despite the sizeable maturity mismatches between its assets and liabilities.

The ratings also factor in the State’s 51 percent ownership of the bank, as well as HDFC’s perceived importance to low- and middle-income housing, sizeable funds derived from the State and related entities, low ultimate credit risk of its housing loans, and inherent limitations in its current business model.

source - www.dailynews.lk

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