AMW Capital Leasing rating affirmed at ‘BBB(lka)’

Fitch Ratings affirmed AMW Capital Leasing And Finance PLC’s (AMWCL) National Long-Term Rating at ‘BBB(lka)’ and said the outlook remains negative.
Fitch said AMWCL’s rating reflects its expectation that its parent, Associated Motor Ways (Pvt.) Limited (AMW), would provide extraordinary support to the finance subsidiary, if required. The assessment takes into account AMW’s 90 percent ownership, shared branding and integration in setting the strategic agenda for AMWCL.

The Negative Outlook on AMWCL’s rating reflects the pressure stemming from its parent’s credit profile. A prolonged ban on vehicle imports continues to impede AMW’s core business of vehicle importation and sales, weakening its earnings capacity and liquidity position. AMW was one of Sri Lanka’s largest vehicle importers prior to the curbs. Sri Lanka has gradually rolled back import restrictions limited vehicle classes but curbs remain on AMW’s primary segment - passenger cars.

“AMWCL’s rating is constrained by our view that any required support from the parent could be considerable relative to AMW’s ability to provide it - given the strain on AMW’s credit profile from challenges to its core business. AMWCL has a sizeable large balance sheet relative to that of its parent,” Fitch said.
AMWCL was established to support its parent’s core business as a captive financier that also undertakes some non-captive business. AMW’s diminished sales operations in Sri Lanka have decreased AMWCL’s captive financing volume. It expects synergies to pick up once passenger car import curbs are relaxed.