Fitch maintains Ceylease Financial Services on Rating Watch Evolving

Monday, 23 January 2012 00:00 - - {{hitsCtrl.values.hits}}

Fitch Ratings Lanka has maintained Ceylease Financial Services Ltd’s (Ceylease) ‘BB+(lka)’ National Long-Term rating on Rating Watch Evolving (RWE).

Ceylease was placed on RWE in July 2011 following Merchant Bank of Sri Lanka Plc’s announcement in May 2011 that the Central Bank of Sri Lanka has provided “in principle approval” for the issuance of a specialised banking license to MBSL subject to its amalgamation with Ceylease and other entities of the Bank of Ceylon (BoC; AA+(lka)’/Stable) group.

BOC owns a 55% stake in Ceylease and a 72% stake in MBSL. The RWE reflects the uncertainty surrounding the final details of the intended merger, the profile of the merged entity, and the resulting shareholding of state-owned BOC in the merged entity. Fitch will resolve the RWE once the above details of the merged entity become more definitive. Retention of the merged entity within the BOC group as well as an increase in BOC’s effective shareholding and future linkage with BoC group may lead to a rating upgrade. Conversely, a decrease in BOC’s effective shareholding through, for example, a divestment of the merged entity and disassociation with the BOC franchise may lead to a downgrade. CFSL’s total assets amounted to Rs. 1.7 billion at end-September 2011. The company operates via two outlets.