ECONOMYNEXT – Fitch Ratings has assigned Singer Finance’s proposed Sri Lankan rupee-denominated subordinated listed debentures an expected National Long-Term Rating of ‘BBB-(EXP)(lka)’.
“This reflects our baseline notching for loss severity for this debt class and our expectations of poor recoveries in the event of default,” Fitch said.
There is no additional notching for non-performance risk, the rating agency said, as the proposed notes do not contain going-concern loss-absorption.
Singer Finance announced it will issue 10 million bonds at 100 rupees each to raise 1 billion in November.
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Sri Lanka’s Singer Finance to raise Rs1bn through bond issue
“The company plans to use the proceeds to strengthen its Tier 2 capital base and support loan-book expansion.”
The full statement is reproduced below:
Fitch Assigns Singer Finance’s Proposed Subordinated Debt ‘BBB-(EXP)(lka)’ Rating
Fitch Ratings – Colombo – 29 Jan 2025: Fitch Ratings has assigned Singer Finance (Lanka) PLC’s (SFP, BBB+(lka)/Stable) proposed Sri Lankan rupee-denominated subordinated listed debentures up to LKR1 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
SFP’s proposed Sri Lankan rupee subordinated debentures are rated two notches below its National Long-Term Rating.
We applied the Bank Rating Criteria in rating this instrument, as we view Sri Lankan finance companies to have a prudential capital framework closer to that for banks.
This reflects our baseline notching for loss severity for this debt class and our expectations of poor recoveries in the event of default.
There is no additional notching for non-performance risk, as the proposed notes do not contain going-concern loss-absorption.
SFP’s National Long-Term Rating was upgraded to ‘BBB+(lka)’ from ‘BBB(lka)’ on 24 January 2025 following the upgrade of parent Singer (Sri Lanka) PLC’s (Singer, AA-(lka)/Stable) National Rating.
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.
Fitch also takes into consideration SFP’s increasing size relative to its parent.
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 January 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 (Sri Lanka) PLC’s National Long-Term Rating.
(Colombo/Jan30/2025)
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