On 3 October 2016, Group Lease PLC (GL) announced that its Board of Directors (BOD) approved two acquisitions. GL will acquire 29.99% of Commercial Credit and Finance PLC (CCF), a finance company in Sri Lanka, and acquire 100% of BG Microfinance Myanmar Co., Ltd. (BGMM), a microfinance company in Myanmar. GL’s wholly-owned subsidiary, Group Lease Holdings Pte., Ltd. (GLH) will make the share purchases. The cost of the two share purchases is approximately Bt3,000 million in total. GL plans to complete the transactions within the fourth quarter of 2016 after obtaining shareholder approvals for the share purchases. TRIS Rating holds the view that GL’s announcement is neutral with respect to the “A-” ratings for GL’s outstanding senior partially guaranteed debentures.
The total transaction value is equivalent to around 22.5% of GL’s assets, based on the consolidated financial statements ending 30 June 2016. GL currently has a low level of leverage. The equity-to-asset ratio, after including the new debt incurred to fund the transactions, will remain at a healthy level of approximately 40%. The debt-to-equity ratio at the end of 2016 is forecasted at 1.27 times, lower than the maximum of 5 times mandated in covenants of the outstanding debentures.
TRIS Rating holds the view that the share acquisitions of companies in Sri Lanka and Myanmar will complement GL’s existing lending business. The expected benefits of the two share acquisitions include the ability for GL to expand its international operations, the ability to capture an increasing share of the microfinance industry in the markets of Association of Southeast Asian Nations (ASEAN), and the ability to enhance GL’s profitability.
TRIS Rating currently assigns ratings of “A-” to GL’s outstanding senior partially guaranteed debentures, along with a “stable” outlook. -- End
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