Fitch Ratings has assigned Siyapatha Finance PLC’s (Siyapatha; A-(lka)/Stable) proposed senior unsecured redeemable debentures of up to LKR2.5bn a National Long-Term expected rating of ‘A-(lka)(EXP)’.
A full list of existing ratings is at the end of this rating action commentary.
The issue will have two tranches with bullet principal repayments in the third and fifth years, and a fixed rate coupon paid annually. The debentures will be listed on the Colombo Stock Exchange. Siyapatha 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.
KEY RATING DRIVERS
SENIOR DEBT
The issue has been rated at the same level as Siyapatha’s National Long-Term rating. The issue ranks equally with the claims of the company’s other senior unsecured creditors. Siyapatha’s ratings reflect Fitch’s view that support would be forthcoming from its parent, Sampath Bank PLC (SB; A+(lka)/Stable), which owns 100% of Siyapatha and is involved in the strategic direction of Siyapatha through board representation. Siyapatha is rated two notches below its parent because of its limited role in the group’s core business.
SB’s group leasing book accounted for just 7% of total group advances at end-2015, of which Siyapatha provided 33%. Since its conversion to a licensed finance company, Siyapatha stopped sharing a common brand with its parent while branches situated within SB’s premises have also decreased.
Siyapatha’s contribution to group profit remains low, averaging 5% of group profit for 2012 to 2015. Fitchdoes not view a potential disposal of Siyapatha, which is not being planned, as being material to the group.
RATING SENSITIVITIES
SENIOR DEBT
Any changes to Siyapatha’s National Long-Term rating would impact the issues National Long-Term rating.
Siyapatha’s rating could change if SB’s rating changes or if Siyapatha’s strategic importance to the bank changes. Narrower notching could result from higher importance to the group through greater synergies, shared brand, and closer operational integration while retaining majority-ownership by SB.
A full list of Siyapatha’s ratings follows:
National Long-Term Rating: ‘A-(lka)’; Outlook Stable
Outstanding subordinate debentures: ‘BBB(lka)’
Proposed senior unsecured debenture: ‘A-(lka)(EXP)’