State-owned savings giant, National Savings Bank (NSB) recently raised yet another debt capital bond to raise Rs.5 billion, furthering its dominance.
This time it was a perpetual capital bond issued to augment the additional Tier 1 capital base of the bank.
It carried the customary features required for a bond of this nature; unlisted, unsecured, rated, subordinated and perpetual in maturity. Further, in compliance with Basel III requirements, it carried non-viability write down features as approved by the Central Bank of Sri Lanka.
This is the first time in the history of a savings bank that a hybrid debt instrument of this nature and in this magnitude was issued, in the Sri Lankan capital market. In compliance with the statutory requirements of the bank, the bond was not listed and was confined to qualified investors. The bank is at the liberty of exercising a call option at its will only after the expiry of a minimum period of five years.
The successful closure of the issue, despite not having a specific date of maturity for the investment, is a testament to the confidence the investors have placed with the bank.
The investors had an option of opting to earn an interest income at a fixed rate or a floating rate which was priced at very attractive terms for this type of a hybrid instrument. The main objective of the issue was to strengthen the additional Tier 1 capital base of the bank.
NSB carries the highest credit rating, a bank can have in the country. This issue is just an extension of a series of issues made in the past, namely the largest international sovereign bond issue of $ 1 billion, unlisted debenture issue of Rs. 20 b and further issuance of Rs. 6 b from 2013-2019. All these issues were structured and managed by the Corporate Finance Division of the bank.
NSB, being a pioneer financier of Sri Lanka’s infrastructure projects, plans to utilise the proceeds of the issue to fund long-term funding requirement of the economy as well as to address the needs of the retail borrowers. The bank’s customer base consists of retail customers of all strata, premier corporates and government entities. The bank’s portfolio of lending also includes overseas ventures. The bank is a partner of major development projects in the country.