Fitch rates Singer Finance’s proposed senior debt ‘BBB(lka)(EXP)’

Fitch Ratings has assigned Singer Finance (Lanka) PLC’s (SFL; BBB(lka)/Stable) proposed senior secured redeemable debentures of up to Rs.1.5 billion a ‘BBB(lka)(EXP)’ national long-term expected rating. 

The issue will have three tranches with bullet principal repayments in the third, fourth and fifth years, with a fixed-rate coupon paid semi-annually. The debentures will be listed on the Colombo Stock Exchange. SFL expects to use the proceeds to fund lending growth, lengthen maturities of its liabilities and reduce structural maturity mismatches.

The agency will assign a final rating to the issue subject to the receipt of final transaction documents conforming to information already received.

The issue has been rated at the same level as SFL’s national long-term rating. The debenture is secured by a primary mortgage over receivables from identified lease agreements. Fitch has not provided any rating uplift for the collateralisation as the recovery prospects are assessed as average and comparable to those of the unsecured notes in a developing legal system.

SFL is rated two notches below its parent, retailing company Singer (Sri Lanka) PLC (Singer; A-(lka)/Stable). This reflects Singer’s majority ownership in SFL, the common Singer brand and Singer’s influence on SFL’s strategic direction through representation on the finance company’s board. The two-notch differential also reflects SFL’s limited role in the group as SFL provides financing for only a low proportion of Singer’s sales.

SFL’s rating also reflects its standalone credit profile, its higher capitalisation levels compared with its peers amid modest loan growth and its improved asset-quality metrics.