Fitch revises Siyapatha Finance’s outlook to negative, affirms at ‘A’

Tuesday, 28 June 2016 00:09 - - {{hitsCtrl.values.hits}}

Fitch Ratings Lanka has revised the rating Outlook on Siyapatha Finance PLC (Siyapatha) to Negative from Stable and affirmed its National Long Term Rating at ‘A( lka)’.

The agency has also affirmed the expected National Long Term Rating on Siyapatha’s proposed senior unsecured redeemable debentures at ‘A(lka)(EXP)’ and affirmed Siyapatha’s outstanding subordinated debentures at ‘BBB+(lka)’.

Key rating drivers

National ratings and senior debt

The rating action follows the revision of the Outlook on its parent, Sampath Bank PLC (Sampath), to Negative from Stable on 22 June 2016.

Fitch continues to believe that support for Siyapatha would be forthcoming from Sampath, if needed.

This view is based on Sampath’s 100% ownership of Siyapatha and involvement in the strategic direction of Siyapatha through board representation.

Siyapatha is rated two notches below its parent because of Siyapatha’s limited role in the group’s core business. Sampath’s leasing book accounted for just 7% of group advances at end 2015, of which

Siyapatha provided 33%. Siyapatha’s contribution to group profit also remains low.

Siyapatha’s proposed senior debentures are rated at the same level as Siyapatha’s National Long Term

Rating. The issue ranks equally with the claims of the company’s other senior unsecured creditors.

Subordinated debt

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

Rating sensitivities

National ratings and senior debt

Siyapatha’s rating could change if Sampath’s rating changes or if Siyapatha’s strategic importance to the bank changes. Narrower notching could result from higher importance to the group through greater synergies, shared branding, and closer operational integration while the bank retains majority ownership. The senior debt rating will move in tandem with the Siyapatha’s National Long Term Rating.

Subordinated debt

The subordinated debt rating will move in tandem with the Siyapatha’s National Long Term Rating.