The amount has been increased to Rs 3bn from Rs2bn. The debentures will have tenors of two to four years and carry fixed and floating coupons. The debentures are to be listed on the Colombo Stock Exchange and the company plans to use the proceeds to fund loan growth, diversify its funding mix and reduce structural maturity mismatches.

KEY RATING DRIVERS

The proposed debentures are rated at the same level as SFC's National Long­Term Rating as they will constitute direct, unconditional, unsecured and unsubordinated obligations of SFC. SFC's rating reflects the satisfactory credit profile that it has maintained through economic cycles, its relatively strong franchise amongst finance companies in Sri Lanka and access to longer­term institutional funding. These are counterbalanced by its deposit franchise and capitalisation, which are weaker than higher­rated peers.

RATING SENSITIVITIES

The rating on the proposed debentures will move in tandem with SFC's National Long­Term Rating. SFC's rating could be downgraded if asset quality weakens, leading to a significant decline in capitalisation or excessive asset encumbrance. An upgrade of SFC's rating is contingent upon maintenance of stronger capitalisation and a more robust deposit franchise that would allow the company to expand in a better controlledmanner. Fitch said.