Fitch Ratings Lanka this week affirmed Commercial Leasing Company Ltd's (CLC) National long-term rating at 'A-(lka)' and also affirmed CLC's senior unsecured debentures at 'A-(lka)' with the ‘Outlook’ listed as ‘Stable’.
The ratings reflects Fitch's expectation that support would be forthcoming from CLC's parent, Lanka ORIX Leasing Company PLC (LOLC), as well as CLC's fairly strong financial profile and good asset quality, according to a Fitch statement. LOLC purchased a 97% stake in CLC in mid-2008, and after acquiring the remaining stake in 2009, it de-listed the company from the Colombo Stock Exchange.
While there has been some integration of core operations since the acquisition, such as treasury and certain back-office functions, the two companies will continue to operate as separate entities, benefiting from strong brand franchises in their respective customer segments. CLC is strategically important to LOLC as an important contributor to group operating profits and in the broadening of the LOLC group's customer base.
Fitch said following a slowdown in loan expansion in FY09 due to asset quality concerns, the company increased disbursements in FY10 to post a loan growth of 17% during the year. The increase was achieved despite a sale of Rs 1 billion of hire purchase facilities (HPs) to the LOLC group company - Lanka ORIX Finance Ltd in September 2009. Lease and HPs together accounted for 76% of total advances, and were mainly for individuals in the SME segment for the purchase of commercial vehicles; the remainder comprised working capital loans secured by vehicle mortgages (9% of advances) and debt factoring (15%). |
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