ASPIC takes control of finance company, IFL

Ownership at the Industrial Finance Limited (IFL), a Sri Lankan finance company, changed hands last month with private equity firm ASPIC Corporation (Pvt) Ltd buying out IFL's major shareholders, Fitch Ratings Lanka said this week.

IFL is a small registered finance company (RFC) with an asset base of Rs 600.5 million at first half 2008 year. It is primarily involved in the provision of vehicle finance by way of leases and hire purchase agreements. The company was established in 1962 by the Tudawe and de Costa families, who have interests in hospitals, construction and apparel manufacturing. ASPIC has interests in a diverse range of activities including real estate development, construction, plantation and exports, and also holds 92% of Central Investments and Finance Limited (CIFL), a RFC which it acquired in 2002.

Fitch said said ASPIC currently holds 61% of IFL's equity and has shown its commitment to meet the initial minimum capital requirement of Rs 100 million by end-March 2008 (FYE08) via two rights issues, and infuse further equity to meet the final Rs. 200 million requirement by the stipulated deadline of end-July 2008. The proposed capital infusions, together with the envisaged operational turnaround and business strategies of the company would warrant a revision of the outlook to ‘Stable’, Fitch said it has downgraded the National Long-term rating of IFL to 'BB-(lka)' (BB minus(lka)) from 'BB+(lka)' with a negative outlook.

“The rating action reflects the substantial operating losses recorded by IFL in the six-month period to end-September 2007 (H108), largely due to considerable provisioning for bad and doubtful debts resulting from operational shortfalls.

The negative outlook reflects the company's need to meet the Central Bank of Sri Lanka's minimum capital requirements and the need for improvements in solvency by way of an equity infusion,” according to a Fitch statement.