Delayed Action

June 29, 2007 (LBO) – Arpico Finance Company Limited has asked for more time to meet the new regulatory capital requirements of the Central Bank, the credit rating agency, Lanka Rating Agency (LRA) said. It said in a statement that it had reaffirmed Arpico Finance's long- and short-term ratings at BB2 (with a stable outlook) and NP, respectively.

"The ratings reflect Arpico’s weak albeit improving asset quality and inadequate capitalisation."

The agency noted that Arpico’s risk-weighted capital adequacy ratio improved from 10.05% to 15.39% during the financial year ending 31 March 2006, following the revaluation of its office premises.

But Arpico's core capital base (shareholders’ funds excluding revaluation reserves) remained at 65.80 million rupees as at end-FY March 2006, although it had to be increased to 100 million rupees by end-February 2007, and further to 200 million rupees by July 2008, to be in-line with the new regulatory requirements of the Central Bank.

"In this respect, the company has requested an extension of time until March 2008 to meet the first 100 million rupee target, via a two-step capital-raising exercise," Lanka Rating Agency said.

"This is of