First Capital Treasuries to raise Rs. 750 m via listed debenture

First Capital Treasuries PLC will be raising Rs. 750 million via an issue of listed, rated, subordinated, unsecured and redeemable debentures of Rs. 100 each.

Its official opening is on 27 January but investors subscribe to it from 21 January. 

Joint managers to the issue are First Capital Ltd., and People’s Bank Investment Banking Unit.

Recently the issuer rating of SL[A-] with stable outlook was reaffirmed for First Capital Holdings PLC (First Capital) by ICRA Lanka Ltd., a subsidiary of ICRA Ltd., a group company of Moody’s Investors Service.  ICRA Lanka also reaffirmed the issuer rating [SL]A- with stable outlook for First Capital’s standalone primary dealer First Capital Treasuries PLC.

The ratings continue to factor in FCH’s status as the holding company of First Capital Treasuries PLC (FCT), a leading standalone primary dealer in Sri Lanka (Issuer rating of [SL]A- with stable outlook). FCH is also the holding company for other financial services entities in the First Capital group; although contribution from these entities to consolidated income remains modest, at present. 

Consequently, FCH’s performance is susceptible to the risks inherent to FCT. The ratings take into account the gearing profile; standalone reported gearing stood at 2.2 times in September 2019 compared with 1.9 times in March 2019, whereas on a cost basis, the gearing continues to remain high at 11.2 times and 9.2 times respectively. The ratings also take cognizance of FCH’s exposure to group and related party entities which have a modest credit risk profile. 

ICRA Lanka however notes that the related party exposures have moderated during Q3FY2020 compared with the peak in September 2018; however, same remains significantly higher than the levels expected by ICRA Lanka. Going forward, it would be crucial for FCH to sizably reduce the inter-group exposures and leverage, from current levels, over the near-term and maintain an adequate liquidity profile.

The outlook may be revised to ‘Positive’ based on FCH’s ability to improve its liquidity profile and substantially improve its exposure and leverage indicators. The outlook may be revised to ‘Negative’ in case the company is unable to sizably reduce the inter-group exposures and leverage, from current levels, over the near-term. Any weakening in FCT’s risk profile, impacting dividend income, would also exert pressure on FCH’s performance.