ICRA Lanka assigns [SL]BBB(SO) rating with Negative outlook to the proposed Asset Backed Secured Trust Certificates of Alliance Finance Co. PLC
|Instrument||Rated Amount (LKR Mn)||Rating Action|
|Proposed Secured Asset Backed Trust Certificates||1,000||[SL]BBB (SO) with Negative outlook; Assigned|
|Issuer rating||N/A||[SL]BBB- with Negative outlook; Outstanding|
ICRA Lanka has assigned the issue rating of [SL]BBB(SO) (pronounced SL triple B Structured Obligation) rating with Negative outlook to the proposed LKR 1,000 Mn asset backed secured trust certificates of Alliance Finance Company PLC (AFC 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 negative outlook outstanding for the Company. Please refer to ICRA Lanka’s rationale dated December 09, 2021 for more details on the issuer.
Structure of the transaction
The key issue details are summarised in the table below.
|Nature of Instrument||Asset backed secured Trust Certificates issued by Alliance Finance Company PLC|
|Issuer||Alliance Finance Company PLC|
|Trustee||Hatton National Bank PLC|
|Repayment:||Monthly after a grace period of 10 months|
|Security||Vehicle Leasing/Loan contract facilities mortgaged with the Trustee to the extent of 130% or more of the face value of the trust certificates and interest|
|Structure||AFC would create Trust and Hatton National Bank PLC would be the Trustee.The Trust would issue certificates to the extent of ~ LKR 1,000Mn The proceeds received by the Trust would be advanced to AFC as a loan.AFC would execute a Mortgage Bond (Deed of Hypothecation in Indian parlance) in favour of the Trust thereby creating exclusive charge over certain unencumbered contracts that it has already originated.The maturity pattern of the leasing/loan contracts will be in-line with the maturity of the trust certificates Aggregate receivables from the leasing/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 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 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:
Alliance Finance Company PLC is the oldest finance company in Sri Lanka with a history of over 60 years. The key shareholders of the Company include Mr. R.K.E.P De Silva (33.64%), Motor Service station (Pvt) Ltd (13.48%), Ms. D.M.E.P Perera (7.42%) and Mr.D.F.W.S.K. Perera (4.10%) as of Sep-20. The Company grants leasing, hire purchase, micro finance, gold loans and other loans. The Company has close to 103,000 customers through a network of 91 customer locations and has over 1,300 employees as of Mar-21. Alliance Finance Company PLC has investments in subsidiary Alfinco Insurance Brokers (Pvt) Ltd (63.94%) and an associate entity, Macbertan (Pvt) Ltd (22.45%) as of Mar-21.
During FY2021, AFC reported a PAT of LKR 561 Mn on a total asset base of LKR 34.12 Bn as compared with a PAT of LKR 209 Mn on a total asset base of LKR 33.95 Bn in the previous financial year. During 3MFY2022, AFC reported a PAT of LKR 28 Mn on a total asset base of LKR 33.78 Bn.
During FY2021, AFC Group reported a PAT of LKR 596 Mn on a total asset base of LKR 34.28 Bn as compared with a PAT of LKR 240 Mn on a total asset base of LKR 34.09 Bn in the previous financial year. During 3MFY2022, AFC Group reported a PAT of LKR 37 Mn on a total asset base of LKR 33.99 Bn.
|Sanduni Kankanamalage |
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