Citizens Development Business Finance PLC

ICRA Lanka reaffirms the [SL]A-(SO) rating on the Trust Certificates Programme of Citizens Development Business Finance PLC – Securitization 03

Rating action

ICRA Lanka Limited, subsidiary of ICRA Limited, group company of Moody’s Investors Service, has reaffirmed the issue rating of [SL]A-(SO) (pronounced SL A minus Structured Obligation) with Negative outlook, for the LKR 628 Mn Trust Certificates programme of Citizens Development Business Finance PLC – Securitization 03. 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 has an issuer rating of [SL]BBB+ (pronounced SL triple B plus) with Negative outlook for Citizens Development Business Finance PLC (CDB or the company). Further, ICRA Lanka has issue ratings outstanding of [SL]BBB (pronounced SL triple B) with Negative outlook for the LKR 2,000 Mn,  LKR 1,075 Mn, and LKR 928 Mn subordinated, unsecured, listed redeemable debenture programmes of the Company, and [SL]A-(SO) (pronounced SL A minus Structured Obligation) with Stable outlook for the LKR 1,000 Mn subordinated, guaranteed, listed redeemable debenture programme. Please refer ICRA Lanka’s rationale dated April 28, 2020 for more details on the issuer.

The rating for the Trust Certificates programme is based on the strength of the senior secured debt with an exclusive charge over receivables and a receivables cover of 130%.  CDB created a Trust by executing a Trust Deed with Hatton National Bank (HNB) as the Trustee. CDB executed a Mortgage Bond in favour of the Trust thereby creating charge in favour of the Trust over a pool of identified Finance Lease Agreements’ receivables that it had originated. The certificates issued by the Trust have a predetermined interest rate and principal repayment schedule. Principal and interest repayments on the loan (given by Trust to CDB) is designed in a manner whereby aggregate receivables during the month from underlying contracts will be 130% or more over repayment on the certificates. Entire receivables collected by CDB from underlying contracts are deposited in an escrow account, two days prior to the repayment dates. In the event of a shortfall in any month, two days prior to the due date, the Trustee will mandatorily send a demand notice to CDB on the same day. In case of any event of default, Trustee can enforce the charge over the underlying contracts and sell the underlying assets to recover the due amounts including capital plus any accrued interest.

Analytical approach: For arriving at the ratings, ICRA Lanka has applied its rating methodologies as indicated below.

Links to applicable criteria:  ICRA Lanka Credit Rating Methodology for Non-Banking Finance Companies

About the company:

Citizens Development Business Finance PLC, a registered finance company, offers leasing, hire purchase, mortgage loans, gold loans and other personal loans apart from accepting deposits (fixed and savings). The Company was established in 1995 as Ceylinco Development Bank Limited. In 2009 CDB was registered under the Finance Companies Act and re-branded as Citizens Development Business Finance PLC. It was listed on the Colombo Stock Exchange in September 2010. As of Dec-19, CDB’s largest shareholders were Ceylinco Insurance PLC (with an effective holding of 40%), Janashakthi group (about 17%) and CDB’s corporate management (about 13%). The Company operates 71 outlets (including service centres) and has access to over 600 ATMs (in alliance with Commercial Bank) across the island as of December 2019. The Company acquired controlling stake in Unison Capital Leasing (UCL, previously known as Laughs Capital Limited) in October 2014 and currently holds about 90.4% shares of the Company.  Under the financial sector consolidation programme of the Central Bank of Sri Lanka, Company is currently in the process of merging with its subsidiary UCL; process is expected to complete by March FY2020.

During the year ended March 31, 2019, CDB (stand-alone) reported a net profit of LKR 1,710 Mn on a total asset base of LKR 89.4 Bn as compared to net profit of LKR 1,401 Mn on a total asset base of LKR 75.5 Bn in the previous fiscal year.

For the nine months ended December 31, 2019, CDB reported a net profit of LKR 989 Mn on a total asset base of LKR 90.3 Bn.

Rating history for last three years: Citizens Development Business Finance PLC – Trust 03:


Ms. Apsara Thurairetnam +94 11 4339907  Mr. Rasanga Weliwatte +94 11 4339907  


Mr. W. Don Barnabas   +94 11 4339907   


Subsidiary of ICRA Limited

A Group Company of Moody's Investors Service

Level10, East Tower, World Trade Center, Colombo 01, Sri Lanka
Tel:+94 11 4339907;Fax:+94112333307;

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