Siyapatha goes for Rs. 1 b debenture, Fitch assigns BBB+ rating

Fitch Ratings Lanka has assigned Siyapatha Finance PLC’s (Siyapatha; A-(lka)/Negative) subordinated redeemable debentures of up to Rs. 1 billion a final National Long-Term Rating of ‘BBB+(lka)’.

The assignment of the final rating follows the receipt of final documents that conform to information previously received. The final rating is at the same level as the expected rating assigned on 21 July.

The debentures will have a five-year tenor with bullet principal repayment at maturity. Coupon payments will be made annually at a fixed rate. The debentures will be listed on the Colombo Stock Exchange. Siyapatha expects to use the proceeds to strengthen its regulatory Tier 2 capital and to fund its loan book.

The debentures are rated one notch below Siyapatha’s National Long-Term Rating to reflect their subordination to senior unsecured creditors.

Siyapatha’s National Long-Term Rating was last affirmed at ‘A-(lka)’ with a Negative Outlook on 21 July. Siyapatha’s rating reflects Fitch’s view that support would be forthcoming from its parent, Sampath Bank PLC (A+(lka)/Negative), 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 Siyapatha’s limited contribution to the group’s core businesses; the group leasing book accounted for just 7% of group advances at end-2016, of which Siyapatha provided 42%. In addition Siyapatha’s contribution to group profit remains low and Siyapatha is branded independently from its parent.

The assigned subordinated debt ratings will move in tandem with Siyapatha’s National Long-Term Ratings.

Siyapatha’s rating could change if Sampath Bank’s ability or propensity to provide support to Siyapatha changes, although Fitch does not expect any material change in the short to medium term.