Fitch Ratings Lanka has assigned Pan Asia Banking Corporation PLC's (PABC) proposed subordinated debentures of up to LKR2.0bn a National Long- Term rating of 'BBB-(lka)'
The issue is rated one notch below PABC's National Long-Term rating reflecting its debt-like features. The proposed debentures will have a maturity of five years with principal repayment as a bullet payment on maturity. Coupon payments will be semi-annual at a fixed rate and do not contain any deferral clauses. The debentures are to be listed on the Colombo Stock Exchange by way of an introduction.
The subordinated debenture issue is aimed at strengthening PABC's regulatory Tier 2 capital. Fitch estimates that the bank's total regulatory capital adequacy ratio (CAR) would increase to about 19% after the issuance given that around LKR1.4bn of the issue amount is eligible for inclusion as Tier II as per the regulatory guidelines. However under Fitch's criteria, these securities will receive zero equity credit as they do not allow for going-concern loss absorption. As such, further expected strong growth at the bank will result in a weakening of its capitalization, as per the agency's measures.