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The debenture will have four types with maturity between three to five years while coupon payments will be fixed rate. The assignment of the final rating follows the receipt of final documents which conform to information previously received. The final rating is at the same level as the expected rating assigned on 14 November 2013 (see ‘Fitch Rates Central Finance Company’s proposed senior ‘A+(lka)’on www.fitchratings.com). KEY RATING DRIVERS The proposed senior secured debenture is rated in line with CFs National Long-term Rating. The debenture is secured by a primary mortgage over receivables from identified hire-purchase and lease agreements. It will be omitted from the enhanced statutory liquid assets requirement for licensed finance companies applicable in 2014.
This is in contrast to unsecured borrowings for which CF will need to post an 5% minimum reserve with the central bank if not included in the company’s capital funds. Fitch has not provided any rating uplift for the collateralisation as the secured notes’ recovery prospects are assessed as being average and comparable with those of the unsecured notes in a developing legal system. RATING SENSITIVITIES Greater product diversity, together with improved funding flexibility commensurate with higher-rated peers, could lead to an upgrade. However, taking into account the current pressure on CF’s asset quality, Fitch does not see an upgrade as likely in the medium term. CF’s rating could be downgraded if it is unable to provide a buffer against further loan quality deterioration through profit, which would lead to an increase in unprovided NPLs relative to equity. The debt ratings will move in tandem with CF’s National Long-Term Rating.
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