Sri Lanka’s Senkadagala Finance 5-year bonds rated ‘BBB(lka)’

ECONOMYNEXT – Fitch Ratings said 1.75 billion rupees of 5-year bonds to be issued by Sri Lanka’s Senkadagala Finance has been given a final rating of ‘BBB(lka)’

The fixed rate 5-year bonds will strengthen Tier II capital of the non-bank lender, Fitch said.

The full statement is reproduced below:

Fitch Rates Senkadagala Finance’s Subordinated Debt
Final ‘BBB(lka)’

Fitch Ratings-Colombo-12 August 2019:

Fitch Ratings Lanka has assigned Senkadagala Finance PLC’s (Senka, BBB+(lka)/Stable)
subordinated unsecured debentures a final National Long-Term Rating of ‘BBB(lka)’.

The issuance totals LKR1.75 billion, with the debentures to mature in five years and carry fixed

The debentures are to be listed on the Colombo Stock Exchange. The debenture issue
will improve Senka’s Tier 2 capital base and the proceeds will be used to fund loan-book growth.

The final rating is the same as the expected rating assigned on 2 April 2019 and follows the receipt
of documents conforming to information already received.

Key Rating Drivers





The subordinated debentures are rated one notch below Senka’s National Long-Term Rating to
reflect the subordination to senior unsecured obligations.

Senka’s National Long-Term Rating was affirmed on 1 July 2019 and reflects its high risk appetite
stemming from its SME-centric loan book and lower financial flexibility compared with peers due
to a heavy reliance on secured wholesale funding.

This offsets any potential benefits stemming from Senka’s established franchise in the domestic vehicle-financing sector and well-matched maturity gaps.

Rating Sensitivities

The rating of the notes will move in tandem with Senka’s National Long-Term Rating.

An upgrade of Senka’s rating is contingent upon the company sustaining stronger capital levels
and improved financial flexibility through a more robust deposit franchise. Senka’s rating could be
downgraded if asset quality weakens, leading to a significant decline in capitalisation or excessive
asset encumbrance.

Date of Relevant Committee


Senkadagala Finance PLC

—-subordinated; National Long Term Rating; New Rating; BBB(lka)

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