TEXT-Fitch asgns final rtgs to APSFC bonds

(The following statement was released by the ratings agency)

May 25 - Fitch Ratings has today assigned Andhra Pradesh State Financial Corporation's (APSFC) INR1bn Series III - 2008 Long-term bonds issued in December 2008 a final rating of 'A(ind)(SO)'. At the same time, the agency has affirmed APSFC's INR1.29bn bonds (Series II-2008) and INR500m bonds (Series I-2007) at 'A(ind)(SO)'. The principal and interest payment of all bonds are unconditionally and irrevocably guaranteed by the Government of Andhra Pradesh (GoAP). The Outlook is Stable.

The ratings reflect the underlying credit profile of the state. The conversion of the expected rating into a final rating follows Fitch's review of the transaction documents subsequent to the closure of the issue. The final ratings to the INR1bn issue (including greenshoe amount of INR0.25bn) takes into consideration the tripartite agreement between APSFC, GoAP and the trustees, M/s GDA Trustee and Consultancy Ltd.. The ratings also benefit from the trustee agreement, which incorporates a structured payment mechanism to ensure timely payment of dues to the bondholders. The repayment mechanism stipulates that 45 days prior to every bond service due date, APSFC must credit the requisite funds in a 'no-lien' account created at IDBI Bank (IDBI.BO: Quote, Profile, Research) ('AA +(ind)') exclusively for bond service, failing which GoAP will be notified. The trustee starts monitoring the process 40 days prior to the due date and will inform the status to GoAP. In the event of deficiency in the 'no-lien' account, seven working days prior to the due date, the trustee will activate the guarantee and the government shall transfer the shortfall at least three working days prior to the due date.

APSFC was established in 1956 as a term-lending institution to promote SMEs in Andhra Pradesh under the State Finance Corporation Act 1951. By FYE08, APSFC's cumulative gross approvals and disbursements crossed INR78bn and INR53bn, respectively. APSFC's gross investment creation stood at INR174bn as at FYE08. The operating profit/total revenue increased to 6.61% in FY08 from 5.14% in FY07. During FY08 the corporation's net profit of INR895.13m wiped out the entire accumulated losses of INR 843.20m suffered during FY00-FY07; the net worth as at FYE08 stands at INR2.66bn.