PLC back with Rs. 6 b public debt issue

Industry giant People’s Leasing & Finance Company (PLC) will tomorrow kick off a fresh initiative to raise Rs. 6 billion via a listed debenture issue.

 The Colombo Stock Exchange (CSE) has approved in principle an application for listing the debt securities of PLC on the main board.

PLC is offering 30 million senior, unsecured, redeemable debentures at an issue price of Rs. 100 each with an option to issue up to a further equal amount in the event the former gets oversubscribed.

The issue officially opens on 19 March but the public could begin subscribing from Friday onwards.

Fitch Ratings has assigned the listed senior unsecured redeemable debentures an expected National Long-Term ‘AA-(lka)(EXP)’ rating.

The debenture is rated in line with PLC’s National Long-term Rating of ‘AA-(lka)’, given that the issue is expected to rank pari passu with the company’s senior unsecured creditors.



A final rating to the issue will be made by Fitch subject to the receipt of final transaction documents which conform to information already received.

Fitch said PLC’s issue is expected to have a tenure of between four to five years, with fixed-rate coupon payments.

PLC expects to utilise the issue proceeds to fund its balance sheet growth. The issue will help improve the company’s liquidity position and reduce its interest rate risk.

Through debt, the company is taking the public route afresh after it listed itself on the CSE raising a mega Rs. 7 billion via an IPO of 390 million shares at Rs. 18 each in October 2011. Yesterday PLC’s share was trading at Rs. 13.10.

PLC’s issue is the largest debenture for this year and equals the biggest of the same value successfully concluded by Bank of Ceylon late last year. Following fresh incentives offered under Budget 2013, there is renewed interest to raise funds via the corporate debt market.

Fitch said PLC’s ratings reflect the capacity and willingness of its State-owned parent People’s Bank (PB, AA+(lka)/Stable, 75% ownership) to extend extraordinary support to PLC in times of distress. This is in turn driven by PLC’s strong association with PB’s brand and its strategic importance to PB.

PB’s capacity to support PLC is in turn derived from the financial capacity and propensity of the government of Sri Lanka (BB-/Stable), given the bank’s increasing role in Sri Lanka’s post-war economic development and its high systemic importance (18% of system assets and deposits in 2011).

Fitch believes it is highly likely for Government support to flow through to PLC via PB due to the reasons mentioned above as well as the potential reputation risk to the Government should PLC default on its financial obligations.

The two-notch differential between the National Long-Term ratings of PLC and PB reflect potential administrative difficulties and regulatory restrictions (such as maximum single party exposures) that exist between the companies, which could impede the flow of Government support to PLC. Such impediments are usually observed in layered support structures.

A change to PB’s rating may result in a corresponding change to PLC’s ratings, provided that the linkage between PB and PLC remain intact. PLC’s ratings may be downgraded if PB gives up its controlling stake, or if PLC’s strategic importance to PB diminishes over time.

Founded in 1995, PLC styles itself as Sri Lanka’s unshakable leader in the leasing sector. In the past 16 years, People’s Leasing has built an extraordinary tradition of excellence in all spheres of leasing and is now the established market leader. PLC’s customers range from individuals to SMEs to blue chip companies in every corner of the island.

The People’s Leasing Group has diversified to include six subsidiaries, united under PLC’s name. Customers can obtain insurance, finance, microfinance and fleet management services under one roof.