Fitch Ratings has assigned Sri Lanka-based People's Leasing & Finance PLC's (PLC, A(lka)/Stable) proposed Sri Lankan rupee-denominated subordinated listed debenture issue of up to LKR10 billion an expected National Long-Term Rating of 'BBB+(lka)(EXP)'.
Key Rating Drivers
The proposed debentures will mature in five years and will be listed on the Colombo Stock Exchange. The company plans to use the proceeds to further strengthen its Tier 2 capital base and support loan growth.
The final rating is subject to the receipt of final documentation conforming to information already received.
The proposed debentures are rated two notches below PLC's National Long-Term Rating. This reflects our baseline notching for loss severity for this debt class and our expectation of poor recoveries in the event of default.
We applied our Bank Rating Criteria to rate the proposed debentures, as we believe the prudential capital framework of Sri Lankan finance companies is close to that for banks. There is no additional notching for non-performance risk, as the proposed debentures do not contain going-concern loss-absorption features.
PLC's National Long-Term Rating was upgraded to 'A(lka)' from 'A-(lka)' on 24 January 2025 following the upgrade of parent People's Bank (Sri Lanka) (PB), to 'AA-(lka)' from 'A(lka)'. PLC's rating reflects Fitch's expectation of extraordinary support from PB, if needed, based on the parent's majority shareholding, PLC's synergistic role and shared branding, offset by the subsidiary's significant size relative to PB. We assess that PLC's support-driven rating is two notches below PB's rating, considering its relative size to PB, which exceeds its standalone credit profile and drives PLC's national rating.
Please refer to our commentary, Fitch Upgrades 10 Sri Lankan NBFIs' Ratings, Affirms 8 Following National Scale Recalibration, published 24 January 2025, for details on PLC's key rating drivers and sensitivities.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
A downgrade of PLC's National Long-Term Rating would lead to a downgrade of the expected subordinated debt rating.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
An upgrade of PLC's National Long-Term Rating would lead to an upgrade of the expected subordinated debt rating.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
Public Ratings with Credit Linkage to other ratings
PLC's rating is linked to PB's National Long-Term Rating.
RATING ACTIONS
Entity / Debt
Rating
People's Leasing & Finance PLC
subordinated
Natl LT
BBB+(EXP)(lka)
Expected Rating
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VIEW ADDITIONAL RATING DETAILS
This report was prepared by Fitch in English only. The company may prepare or arrange for translated versions of this report. In the event of any inconsistency between the English version and any translated version, the former shall always prevail. Fitch is not responsible for any translated version of this report.
Additional information is available on www.fitchratings.com
PARTICIPATION STATUS
The rated entity (and/or its agents) or, in the case of structured finance, one or more of the transaction parties participated in the rating process except that the following issuer(s), if any, did not participate in the rating process, or provide additional information, beyond the issuer's available public disclosure.
APPLICABLE CRITERIA
National Scale Rating Criteria (pub. 22 Dec 2020)
Non-Bank Financial Institutions Rating Criteria (pub. 01 Feb 2025) (including rating assumption sensitivity)
Bank Rating Criteria (pub. 22 Mar 2025) (including rating assumption sensitivity)
ADDITIONAL DISCLOSURES
Solicitation Status
Endorsement Policy
Potential Conflicts Resulting from Revenue Concentrations
ENDORSEMENT STATUS
People's Leasing & Finance PLC EU Endorsed, UK Endorsed
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Solicitation Status
The ratings above were solicited and assigned or maintained by Fitch at the request of the rated entity/issuer or a related third party. Any exceptions follow below.
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Endorsement Policy
Fitch's international credit ratings produced outside the EU or the UK, as the case may be, are endorsed for use by regulated entities within the EU or the UK, respectively, for regulatory purposes, pursuant to the terms of the EU CRA Regulation or the UK Credit Rating Agencies (Amendment etc.) (EU Exit) Regulations 2019, as the case may be. Fitch's approach to endorsement in the EU and the UK can be found on Fitch's Regulatory Affairs page on Fitch's website. The endorsement status of international credit ratings is provided within the entity summary page for each rated entity and in the transaction detail pages for structured finance transactions on the Fitch website. These disclosures are updated on a daily basis.
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