ICRA Lanka Limited has reaffirmed the issuer rating of [SL]A- (pronounced as S L A minus) for LOLC Development Finance PLC (“LDFP” /”the Company”), formerly known as BRAC Lanka Finance PLC), while revising the outlook to Stable from rating watch with developing implications.
ICRA Lanka has taken the consolidated view of the LOLC group, which has interests in various segments including financial services, insurance, manufacturing, trading, plantation, renewable energy, and leisure when arriving at the ratings.
On April 10, 2020, LOLC Group has divested 70% of its stake in PRASAC for a total consideration of about USD 603 Mn. The investment was held by LOLC International Private Limited (LOLCIPL), a fully owned subsidiary of LOLC holdings, incorporated in Singapore. Accordingly, LOLCIPL has received USD 422 Mn being the first tranche of the sales proceeds, in line with the share purchase agreement that had been entered into by the parties. The Group has used a significant portion (about USD 130Mn) of the proceeds to repay the debt at the holding company level. The balance sales proceeds amounting to USD 181 Mn will be received in 2022.
ICRA Lanka takes cognizance of the improvement of the capitalization profile of the holding company, with standalone gearing expected to moderate to about 0.80x vis-à-vis 1.83x in December 2019 and 1.62x in March 2019. Consolidated Group gearing is also expected to moderate to about 3.7x vis-à-vis 6.3x in September 2019.
The rating also factors the significant moderation of the overall size and scale of LOLC Group, post divestment. As in September 2019, PRASAC accounted for about 45% of group assets and about 57% of the Group’s loan book. Also, PRASAC accounted for about 70% of the LKR 19.6 Bn PAT reported by the Group in FY2019.
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