Siyapatha Finance Rs.2.5bn debenture opens this Thursday

Sampath Bank PLC’s fully owned subsidiary and the licensed finance company, Siyapatha Finance PLC’s Rs.2.5 billion senior debenture issue will open on September 8, the company said in a stock exchange filing. 

The company will initially issue 20 million debentures at Rs.100 each, with an option to issue a further 5 million debentures in the event the first tranche being over-subscribed. 
The issue has received a final rating of A- with a ‘negative’ outlook from Fitch Ratings Lanka Limited. 

The proceeds will be used to fund its lending growth, lengthen maturities of its liabilities and reduce structural maturity mismatches. 
The issue will have two types – Type A will have a three year tenor with 13 percent fixed interest rate paid annually while Type B will have a tenor of five years with a fixed rate of 13.5 percent paid annually. 

The company had been planning to issue the debenture since the beginning of the year but waited for over six months probably to take cues from the direction of the interest rates. The analysts believe the interest rates have now reached their peak. 

However, much will hinge on the pace of the growth in private credit – which has shown some easing – and the success of government’s fiscal consolidation process.  
This is the second such debenture by Siyapatha Finance as the company raised Rs.1 billion in a debenture issued in December 2014 at 8.9 percent yield. 
Just prior to the second 50 basis point hike in key rates by the Central Bank, Seylan Bank PLC issued Rs.5 billion in subordinated debentures in 5 year and 7-year tenors at 13.0 percent and 13.75 percent fixed rate coupons while the floating rate coupon offered was 1-year treasury bill plus 1.5 percent. 

According to Fitch Ratings Siyapatha has a limited role in Sampath Bank’s core business as the former accounts for just 7 percent of total group advances as at end 2015. 
The contribution to group profit has also averaged 5 percent during 2012 to 2015. 

During the six months ended June 30, 2016, Siyapatha made a net profit of Rs. 147.8 million, narrowing 19 percent from a year ago. For the June quarter, the net profit slipped 5 percent to Rs. Rs.79.7 million from a year ago as rising interest costs started pinching the margins. 

During the six months, loans and receivables grew by Rs.2.3 billion to Rs.15.8 billion. 
The company has a deposit base of Rs.2.9 billion, which rose by Rs.1.7 billion during the six months. 
The company has a balance sheet of Rs.17.3 billion as of June 30, 2016.