Union Bank to raise Rs.3bn via Basel III-compliant debenture issue

Union Bank of Colombo PLC announced its proposed debenture issue 2026, a strategic move aimed at raising up to Rs.3 billion. 

This issue is designed to bolster the bank’s Tier II capital base and provide a robust financial foundation for its upcoming growth initiatives.

The offering consists of Basel III-compliant, listed, rated, unsecured, subordinated, redeemable high-yield debentures, with a non-viability conversion. The instrument has been assigned a rating of BB (lka) by Fitch Ratings (Lanka) Ltd, reflecting the bank’s creditworthiness and the structured nature of the subordinated debt.  

The investors can choose from three distinct interest structures, starting from a high-yield 13 percent fixed rate per annum (Type A). This option is paid annually, while Type B offers a 12.5 percent fixed rate paid semi-annually (12.89 percent AER). For those seeking market-linked returns, Type C provides a floating rate of the 182-days treasury bill rate plus a 400-basis point margin, also paid semi-annually.

The debentures are priced at Rs.100 per unit, with a five-year tenure (2026–2031). The initial issue size is set at 20,000,000 debentures, with an option to raise 10,000,000, at the discretion of the bank and is scheduled to open on March 10, 2026.

Union Bank Chief Financial Officer Shanka Abeywardene stated, “This debenture issue marks a significant step in the bank’s journey towards enhanced financial stability. By strengthening its capital adequacy, Union Bank is well-positioned to navigate the evolving market conditions while fuelling its long-term strategic objectives for sustainable growth.”

The manager and placement agent for the issue is First Capital Advisory Services (Pvt.) Limited