RAM Ratings Lanka reaffirms MBSL at AA-/P1

RAM Ratings Lanka has reaffirmed Merchant Bank of Sri Lanka's (MBSL) long and short-term ratings at AA- and P1. The long-term rating of AA- for the Company's Rs. 186.80m Unsecured Unlisted Public Debentures (2007/2011) has also been reaffirmed. All long-term ratings have a stable outlook.

RAM Ratings Lanka has also assigned a short-term rating of P1 to the Company's proposed Rs. 500m Unsecured Commercial Paper Program(2010/2011).

All ratings are supported by MBSL's strong capitalisation and financial flexibility derived from its parent, Bank of Ceylon (BoC). The ratings are weighed down by the Company's weak asset quality albeit it had improved during the year.

MBSL is a 72.14 percent owned subsidiary of BOC. It is a small specialised leasing company, accounting for only 4.85 percent of the industry's asset base as at December 2010. BoC has consistently demonstrated its support via equity injections and funding lines; it infused Rs. 347.91m into MBSL by way of a rights issue in December 2009, and has provided the Company with Rs 600 m of unutilised funding lines.

MBSL has threes subsidiaries, Merchant Credit of Sri Lanka, MBSL Savings Bank and MBSL Insurance Ltd, as well as an associate company, Lanka Securities Pvt Ltd. The MBSL Group has an asset base of Rs. 14.44b.