Financial Times

Fitch affirms Merchant Credit of Sri Lanka's rating

Fitch Ratings Lanka last week affirmed Merchant Credit of Sri Lanka Ltd's (MCSL) National Long-term rating at 'BBB(lka)'. Fitch said “the agency takes considerable comfort from BOC's strength and its effective ownership of 88% of MCSL's equity, as well as board influence through common directors. However, MCSL's rating is constrained by its weak asset quality and low capitalisation which has resulted in poor solvency.”

MCSL's core business is the provision of vehicle finance in the form of finance leases and hire purchase (HP) which together represented 75% of its asset base at FYE07. Historically, asset quality has been weak on account of poor monitoring. Reflecting the impact of the challenging macroeconomic environment, the gross NPL ratio rose to 32.5% at FYE07 from 20 % at FYE06.

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