Fitch assigns Merchant Bank of Sri Lanka’s subordinated debt final ‘BBB+’

Wednesday, 14 May 2025 00:02 - - {{hitsCtrl.values.hits}}

Fitch Ratings has assigned Merchant Bank of Sri Lanka & Finance PLC’s (MBSL, A(lka)/Stable) proposed subordinated debentures of up to Rs. 1 billion a final National Long-Term Rating of ‘BBB+(lka)’.

The final rating is in line with the expected rating published on 2 May and follows the receipt of documents conforming to information already received.

The proposed Sri Lankan rupee-denominated debentures will mature in five years and will be listed on the Colombo Stock Exchange. The company plans to use the proceeds to strengthen its Tier 2 capital base and support loan-book expansion.

Fitch issued the following key drivers for its rating decision:

MBSL’s Sri Lankan rupee-denominated subordinated debentures are rated two notches below its National Long-Term Rating. We applied the Bank Rating Criteria in rating this instrument, as we believe Sri Lankan finance companies have a prudential capital framework closer to that for banks. The rating reflects our baseline notching for loss severity for this debt class and our expectation of poor recovery in the event of default. There is no additional notching for non-performance risk, as the notes do not contain going-concern loss-absorption features.

MBSL’s National Long-Term Rating was upgraded to ‘A(lka)’ from ‘BBB+(lka)’ on 24 January 2025 following the upgrade of parent Bank of Ceylon’s (BOC, AA-(lka)/Stable) National Long-Term Rating to ‘AA-(lka)’ from ‘A(lka)’. MBSL’s rating reflects our expectation that BOC would provide extraordinary support to the subsidiary if required. This view is based on BOC’s 84.5% stake, history of equity support, control over MBSL’s policies and strategies through board representation, and known links between BOC and MBSL.

Discover Kapruka, the leading online shopping platform in Sri Lanka, where you can conveniently send Gifts and Flowers to your loved ones for any event including Valentine ’s Day. Explore a wide range of popular Shopping Categories on Kapruka, including Toys, Groceries, Electronics, Birthday Cakes, Fruits, Chocolates, Flower Bouquets, Clothing, Watches, Lingerie, Gift Sets and Jewellery. Also if you’re interested in selling with Kapruka, Partner Central by Kapruka is the best solution to start with. Moreover, through Kapruka Global Shop, you can also enjoy the convenience of purchasing products from renowned platforms like Amazon and eBay and have them delivered to Sri Lanka.