Fitch rates Senkadagala Finance’s senior debt BBB+(lka)(EXP)

Fitch Ratings has assigned Senkadagala Finance PLC's (SFC: BBB+(lka)/Stable) proposed issue of senior unsecured redeemable debentures of up to LKR2bn an expected National Long-Term rating of 'BBB+(lka)(EXP)'. The debentures will have tenors of two to four years and carry fixed and floating coupons. The debentures are to be listed on the Colombo Stock Exchange and the company plans to use the proceeds to fund loan growth, diversify its funding mix and reduce structural maturity mismatches. The final rating is subject to the receipt of final documentation conforming to information already received. KEY RATING DRIVERS The proposed debentures are rated at the same level as SFC's National Long-Term Rating as they will constitute direct, unconditional, unsecured and unsubordinated obligations of SFC. SFC's rating reflects the satisfactory credit profile that it has maintained through economic cycles, its relatively strong franchise amongst finance companies in Sri Lanka and access to longer-term institutional funding. These are counterbalanced by its deposit franchise and capitalisation, which are weaker compared with higher-rated peers. RATING SENSITIVITIES The rating on the proposed debentures will move in tandem with SFC's National Long-Term Rating. An upgrade of SFC's rating is contingent upon the company sustaining stronger capital levels and a more robust deposit franchise that would allow the company to expand in a controlled manner. A sharp decline in its asset quality leading to a significant decline in capitalisation or excessive asset encumbrance could result in a rating downgrade.