ECONOMYNEXT – Fitch Ratings has assigned Singer Finance’s proposed Sri Lankan rupee-denominated 2 billion debenture issue an expected national long-term rating of ‘BBB-(EXP)(lka)’.
The company plans to use the proceeds to strengthen its Tier 2 capital base and support loan-book expansion.
“We applied our Bank Rating Criteria to rate the proposed debentures, as we believe the prudential capital framework of Sri Lankan finance companies is close to that for banks,” Fitch said.
“This reflects our baseline notching for loss severity for this debt class and our expectation of poor recoveries in the event of default. There is no additional notching for non-performance risk, as the proposed debentures do not contain going-concern loss-absorption.”
The full statement is reproduced below:
Fitch Assigns Singer Finance’s Proposed Subordinated Debt ‘BBB-(EXP)(lka)’ Rating
Thu 06 Mar, 2025 – 2:05 AM ET
Fitch Ratings – Colombo/Mumbai – 06 Mar 2025: Fitch Ratings has assigned Singer Finance (Lanka) PLC’s (SFP, BBB+(lka)/Stable) proposed Sri Lankan rupee-denominated subordinated listed debentures of up to LKR2 billion an expected National Long-Term Rating of ‘BBB-(EXP)(lka)’.
The proposed debentures will mature in five years and will be listed on the Colombo Stock Exchange. The company plans to use the proceeds to strengthen its Tier 2 capital base and support loan-book expansion.
The final rating is subject to the receipt of final documentation conforming to information already received.
Key Rating Drivers
The proposed debentures are rated two notches below SFP’s National Long-Term Rating. The instruments follow the same structure and are rated at the same level as SFP’s outstanding subordinated debt issued in 2021.
We applied our Bank Rating Criteria to rate the proposed debentures, as we believe the prudential capital framework of Sri Lankan finance companies is close to that for banks. This reflects our baseline notching for loss severity for this debt class and our expectation of poor recoveries in the event of default. There is no additional notching for non-performance risk, as the proposed debentures do not contain going-concern loss-absorption.
We upgraded SFP’s National Long-Term Rating to ‘BBB+(lka)’, from ‘BBB(lka)’, in January 2025 following the upgrade of the parent, Singer (Sri Lanka) PLC (Singer, AA-(lka)/Stable). SFP’S rating reflects our expectation that Singer would provide extraordinary support to SFP if needed. This view is based on Singer’s 80% ownership stake, common branding and a record of equity injections. We also take into consideration SFP’s increasing size relative to its parent, as this may weigh on the parent’s ability to provide support.
Please refer to our commentary, Fitch Upgrades 10 Sri Lankan NBFIs’ Ratings, Affirms 8 Following National Scale Recalibration.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
A downgrade of SFP’s National Long-Term Rating would lead to a downgrade of the expected subordinated debt rating.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
An upgrade of SFP’s National Long-Term Rating would lead to an upgrade of the expected subordinated debt rating.
Date of Relevant Committee
23-Jan-2025
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
Public Ratings with Credit Linkage to other ratings
SFP’s rating is linked to Singer’s National Long-Term Rating
(Colombo/Mar6/2025)
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