Asia Asset Finance PLC

ICRA Lanka assigns [SL]A-(SO) rating to the proposed Asset Backed Secured Trust Certificates of Asia Asset Finance PLC

Instrument*Rated Amount (LKR Mn)Rating Action
Proposed Secured Asset Backed Trust Certificates600[SL]A- (SO) with Stable outlook; Assigned
Asset backed secured debenture program1,000[SL]A- (SO) with Stable outlook; Outstanding
Issuer ratingN/A[SL]BBB+ with Stable outlook; Outstanding
Asset backed secured debenture program1,000[SL]A- (SO) with Stable outlook; Outstanding

Rating action                                                            

ICRA Lanka has assigned the issue rating of [SL]A-(SO) (pronounced SL A minus Structured Obligation) with Stable outlook to the proposed LKR 600 Mn asset backed secured trust certificates of Asia Asset Finance PLC (AAF or the Company). The letters SO in parenthesis suffixed to a rating symbol stand for Structured Obligation. A (SO) rating is specific to the rated issue, its terms, and its structure. The SO rating does not represent ICRA Lanka’s opinion on the general credit quality of the issuer concerned.

ICRA Lanka also has an issuer rating of [SL]BBB+ with stable outlook and issue rating of [SL]A-(SO) (pronounced SL A minus Structured Obligation) with Stable outlook for  LKR 1,000 Mn asset backed secured debenture programme and issue rating of [SL]A-(SO) (pronounced SL A minus Structured Obligation) with Stable outlook for the LKR 1,000Mn asset backed securitization program outstanding for the Company. Please refer to ICRA Lanka’s rationale dated May 04, 2021 and August 05, 2021 for more details on the issuer.

Structure of the transaction
Issue Details:

The key issue details are summarised in the table below.

Nature of InstrumentAsset backed secured Trust Certificates issued by Asia Asset Finance PLC
IssuerAsia Asset Finance PLC
TrusteeHatton National Bank PLC
Tenor03 years
Repayment:At maturity
Interest10.00% – 10.25% payable annually
SecurityGold loan facilities mortgaged with the Trustee to the extent of 130% of the face value of the trust certificates and interest
StructureAAF would create Trust and Hatton National Bank PLC would be the Trustee.The Trust would issue certificates to the extent of ~ LKR 600Mn The proceeds received by the Trust would be advanced to AAF as a loan.AAF would execute a Mortgage Bond in favour of the Trust thereby creating exclusive charge over certain unencumbered contracts that it has already originated.The maturity pattern of the gold loan contracts will be in-line with the maturity of the trust certificates Aggregate receivables from the gold loan contracts will be 130% or more over repayment on the certificates. This 130% cover will be ensured for all repayment dates.
Refund of excess fundsAmounts received by the Trustee, which are in excess of the amount necessary to settle the Investors in any given month will be refunded to the Company on the working day immediately after the date on which such settlement is made
Compliance:Issuer shall ensure that all the terms and conditions of the transaction structure, as stated herein are complied with, and reported to ICRA Lanka periodically, as required.

Analytical approach: For arriving at the ratings, ICRA has applied its rating methodologies as indicated below.Links to applicable criteria:  ICRA Lanka’s Credit Rating Methodology for Non-Banking Financial Institutions

About the company:

Asia Asset Finance PLC is a registered finance company setup in 1970 as “Finance and Land Sales Company”. In 2004, Asia Capital PLC (ACP) acquired AAF. In August 2014, MFL acquired about 30% of the company and in December 2014, MFL increased its stake up to 51%. During FY2020, MFL has further increased its stake to about 73% via a rights issue. AAF offers gold loans, SME loans, vehicle finance (2 wheelers, 3 wheelers, cars & vans etc.), loan against property, fixed deposits and other personal credit facilities.

During FY2021, AAF reported a PAT of LKR LKR 45 Mn on an asset base of LKR 15,350 Mn, as compared with a PAT of LKR 70 Mn on a total asset base of LKR 15,155 Mn in the previous financial year.

During 3MFY2022, AAF reported a profit after tax of LKR 10 Mn on an asset base of LKR 16,060 Mn.

Key financial indicators
 FY2019FY2020FY20213MFY2022*
Net Interest Income1,2891,3391,164242
Profit after Tax101704510
Reported net worth1,9532,1712,2222,232
Loans and Advances (Net)11,55612,64012,41112,632
Total Assets13,89915,15515,35016,060
Return on Equity5.3%3.4%2.1%1.7%
Return on Assets0.8%0.5%0.3%0.3%
Gross NPA9.2%16.2%19.8% 
Net NPA0.9%5.9%4.7% 
Core Capital Adequacy Ratio15.6%16.2%16.8% 
Adjusted Gearing (adjusted for revaluation reserve and deffered tax)(times)6.86.56.46.7

*Unaudited

Rating history for last three years:
Analysts
Sanduni Kankanamalage
+94-777478138
sanduni@icralanka.com  

Rasanga Weliwatte
+94-773553564
rasanga@icralanka.com


Disclaimer
ICRA Logo

Subsidiary of ICRA Limited

A Group Company of Moody's Investors Service

CORPORATE OFFICE
Level10, East Tower, World Trade Center, Colombo 01, Sri Lanka
Tel:+94 11 4339907;Fax:+94112333307 Email:info@icralanka.com; Website:www.icralanka.com

© Copyright, 2021 ICRA Lanka Limited. All Rights Reserved. Contents may be used freely with due acknowledgement to ICRA Lanka.

ICRA Lanka ratings should not be treated as recommendations to buy, sell or hold the rated debt instruments. ICRA Lanka ratings are subject to a process of surveillance, which may lead to revision in ratings. An ICRA Lanka rating is a symbolic indicator of ICRA Lanka’s current opinion on the relative capability of the issuer concerned to timely service debts and obligations, with reference to the instrument rated. Please visit our website www.icralanka.com or contact ICRA Lanka’s office for the latest information on the outstanding ICRA Lanka ratings.

All information contained herein has been obtained by ICRA Lanka from sources believed by it to be accurate and reliable, including the rated issuer. ICRA Lanka however has not conducted any audit of the rated issuer or of the information provided by it. While reasonable care has been taken to ensure that the information herein is true, such information is provided ‘as is’ without any warranty of any kind, and ICRA Lanka in particular, makes no representation or warranty, express or implied, as to the accuracy, timeliness or completeness of any such information.

ICRA Lanka does not take any responsibility for accuracy of material/documents prepared or published by other parties based on this document. All ICRA Lanka official rating rationales are prepared in English and external parties may present or publish translated versions of the same. Readers are henceforth advised to refer to the ICRA Lanka’s official rating rationale in the event of any inconsistency found in such documents.

ICRA Lanka or any of its group companies may have provided services other than rating to the issuer rated. All information contained herein must be construed solely as statements of opinion, and ICRA Lanka shall not be liable for any losses incurred by users from any use of this publication or its contents.

Asia Asset Finance PLC

ICRA Lanka assigns [SL]A-(SO) rating to the proposed Asset Backed Secured Trust Certificates of Asia Asset Finance PLC

Instrument*Rated Amount (LKR Mn)Rating Action
Proposed Secured Asset Backed Trust Certificates600[SL]A- (SO) with Stable outlook; Assigned
Asset backed secured debenture program1,000[SL]A- (SO) with Stable outlook; Outstanding
Issuer ratingN/A[SL]BBB+ with Stable outlook; Outstanding
Asset backed secured debenture program1,000[SL]A- (SO) with Stable outlook; Outstanding

Rating action                                                            

ICRA Lanka has assigned the issue rating of [SL]A-(SO) (pronounced SL A minus Structured Obligation) with Stable outlook to the proposed LKR 600 Mn asset backed secured trust certificates of Asia Asset Finance PLC (AAF or the Company). The letters SO in parenthesis suffixed to a rating symbol stand for Structured Obligation. A (SO) rating is specific to the rated issue, its terms, and its structure. The SO rating does not represent ICRA Lanka’s opinion on the general credit quality of the issuer concerned.

ICRA Lanka also has an issuer rating of [SL]BBB+ with stable outlook and issue rating of [SL]A-(SO) (pronounced SL A minus Structured Obligation) with Stable outlook for  LKR 1,000 Mn asset backed secured debenture programme and issue rating of [SL]A-(SO) (pronounced SL A minus Structured Obligation) with Stable outlook for the LKR 1,000Mn asset backed securitization program outstanding for the Company. Please refer to ICRA Lanka’s rationale dated May 04, 2021 and August 05, 2021 for more details on the issuer.

Structure of the transaction
Issue Details:

The key issue details are summarised in the table below.

Nature of InstrumentAsset backed secured Trust Certificates issued by Asia Asset Finance PLC
IssuerAsia Asset Finance PLC
TrusteeHatton National Bank PLC
Tenor03 years
Repayment:At maturity
Interest10.00% – 10.25% payable annually
SecurityGold loan facilities mortgaged with the Trustee to the extent of 130% of the face value of the trust certificates and interest
StructureAAF would create Trust and Hatton National Bank PLC would be the Trustee.The Trust would issue certificates to the extent of ~ LKR 600Mn The proceeds received by the Trust would be advanced to AAF as a loan.AAF would execute a Mortgage Bond in favour of the Trust thereby creating exclusive charge over certain unencumbered contracts that it has already originated.The maturity pattern of the gold loan contracts will be in-line with the maturity of the trust certificates Aggregate receivables from the gold loan contracts will be 130% or more over repayment on the certificates. This 130% cover will be ensured for all repayment dates.
Refund of excess fundsAmounts received by the Trustee, which are in excess of the amount necessary to settle the Investors in any given month will be refunded to the Company on the working day immediately after the date on which such settlement is made
Compliance:Issuer shall ensure that all the terms and conditions of the transaction structure, as stated herein are complied with, and reported to ICRA Lanka periodically, as required.

Analytical approach: For arriving at the ratings, ICRA has applied its rating methodologies as indicated below.Links to applicable criteria:  ICRA Lanka’s Credit Rating Methodology for Non-Banking Financial Institutions

About the company:

Asia Asset Finance PLC is a registered finance company setup in 1970 as “Finance and Land Sales Company”. In 2004, Asia Capital PLC (ACP) acquired AAF. In August 2014, MFL acquired about 30% of the company and in December 2014, MFL increased its stake up to 51%. During FY2020, MFL has further increased its stake to about 73% via a rights issue. AAF offers gold loans, SME loans, vehicle finance (2 wheelers, 3 wheelers, cars & vans etc.), loan against property, fixed deposits and other personal credit facilities.

During FY2021, AAF reported a PAT of LKR LKR 45 Mn on an asset base of LKR 15,350 Mn, as compared with a PAT of LKR 70 Mn on a total asset base of LKR 15,155 Mn in the previous financial year.

During 3MFY2022, AAF reported a profit after tax of LKR 10 Mn on an asset base of LKR 16,060 Mn.

Key financial indicators
 FY2019FY2020FY20213MFY2022*
Net Interest Income1,2891,3391,164242
Profit after Tax101704510
Reported net worth1,9532,1712,2222,232
Loans and Advances (Net)11,55612,64012,41112,632
Total Assets13,89915,15515,35016,060
Return on Equity5.3%3.4%2.1%1.7%
Return on Assets0.8%0.5%0.3%0.3%
Gross NPA9.2%16.2%19.8% 
Net NPA0.9%5.9%4.7% 
Core Capital Adequacy Ratio15.6%16.2%16.8% 
Adjusted Gearing (adjusted for revaluation reserve and deffered tax)(times)6.86.56.46.7

*Unaudited

Rating history for last three years:
Analysts
Sanduni Kankanamalage
+94-777478138
sanduni@icralanka.com  

Rasanga Weliwatte
+94-773553564
rasanga@icralanka.com


Disclaimer
ICRA Logo

Subsidiary of ICRA Limited

CORPORATE OFFICE
Level10, East Tower, World Trade Center, Colombo 01, Sri Lanka
Tel:+94 11 4339907;Fax:+94112333307 Email:info@icralanka.com; Website:www.icralanka.com

© Copyright, 2021 ICRA Lanka Limited. All Rights Reserved. Contents may be used freely with due acknowledgement to ICRA Lanka.

ICRA Lanka ratings should not be treated as recommendations to buy, sell or hold the rated debt instruments. ICRA Lanka ratings are subject to a process of surveillance, which may lead to revision in ratings. An ICRA Lanka rating is a symbolic indicator of ICRA Lanka’s current opinion on the relative capability of the issuer concerned to timely service debts and obligations, with reference to the instrument rated. Please visit our website www.icralanka.com or contact ICRA Lanka’s office for the latest information on the outstanding ICRA Lanka ratings.

All information contained herein has been obtained by ICRA Lanka from sources believed by it to be accurate and reliable, including the rated issuer. ICRA Lanka however has not conducted any audit of the rated issuer or of the information provided by it. While reasonable care has been taken to ensure that the information herein is true, such information is provided ‘as is’ without any warranty of any kind, and ICRA Lanka in particular, makes no representation or warranty, express or implied, as to the accuracy, timeliness or completeness of any such information.

ICRA Lanka does not take any responsibility for accuracy of material/documents prepared or published by other parties based on this document. All ICRA Lanka official rating rationales are prepared in English and external parties may present or publish translated versions of the same. Readers are henceforth advised to refer to the ICRA Lanka’s official rating rationale in the event of any inconsistency found in such documents.

ICRA Lanka or any of its group companies may have provided services other than rating to the issuer rated. All information contained herein must be construed solely as statements of opinion, and ICRA Lanka shall not be liable for any losses incurred by users from any use of this publication or its contents.