ICRA Lanka assigns [SL]A-(SO) with Negative outlook to the proposed asset backed secured debenture of Asia Asset Finance PLC
ICRA Lanka Limited has assigned [SL]A-(SO) (pronounced SL A minus Structured Obligation) rating with Negative outlook to the proposed LKR 1,000 Mn asset backed secured debenture programme of Asia Asset Finance PLC (AAF or the Company). The letters SO in parenthesis suffixed to a rating symbol stand for Structured Obligation. The (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 has an issuer rating of [SL]BBB+ (pronounced SL triple B plus) with Negative outlook for Asia Asset Finance PLC (AAF or the Company). Please refer to ICRA Lanka’s rationale dated December 09, 2019 for more details on the issuer.
Structure of the transaction
The key issue details are summarised in the table below.
|Nature of Instrument||Trust Certificates issued by Asia Asset Finance PLC|
|Company / Originator||Asia Asset Finance PLC|
|Issuer||Asia Asset Finance PLC – Trust|
|Interest||To be decided|
|Security||Gold loan facilities of pre-identified branches to the extent of 120% of the face value of the debentures|
|Structure||AAF would create Trust and Hatton National Bank PLC would be the Trustee.Entire debenture proceeds to be mortgaged with the trustee Debenture proceeds will be released to the issuer gradually, as and when the issuer pledges fresh gold loan contracts with the trustee Entire gold loan portfolios of these selected branches will be pledged as security with the trustee:Value of the gold loan contracts pledged will be more than or equal to 1.2x the cash released by the trustee|
|Refund of excess funds||Amounts 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 & conditions of the transaction structure, as stated herein are complied with, within 90 days from the deemed date of allotment. Issuer shall send the final draft version of the transaction documents to ICRA Lanka at least two working days prior to their execution. Once the transaction documents are executed, the Trustee shall confirm to ICRA Lanka about the same.|
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, Muthoot Finance Limited (MFL) acquired about 30% of the company and in December 14, 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 (2wheelers, 3 wheelers, cars & vans etc.), loans against property, fixed deposits and other personal credit facilities.
During FY2019, AAF reported a PAT of LKR 101 Mn on a total asset base of LKR 13.9 Bn as compared with a PAT of LKR 178 Mn on a total asset base of LKR 11.7 Bn in the previous financial year. During 9M ended December 2019, AAF reported a PAT of LKR 91 Mn on a total average asset base LKR 14.3 Bn.
Key financial indicators (audited)
Rating history for last three years:
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