Rs.8bn in financing for Bank of Ceylon through listed debt

State-owned Bank of Ceylon (BOC), Sri Lanka’s largest bank, will be listing a Rs.5 billion debenture on the Colombo Stock Exchange tomorrow, in order to improve its capital adequacies and to expand its loan book amid high private credit growth. In a statement, BOC said that the debenture issue could be further expanded to Rs.8 billion in the case of oversubscription and that the minimum investment would be Rs.10,000.
Four types of debentures will be issued, with five and eight-year maturities with both fixed and floating coupon rates offered for each period of maturity. “The fixed coupon rate of the five-year debenture will be 13.25 percent while the eight-year debenture will be 12.75 percent. The floating coupon rate of both five-year and eight-year debentures will be 1.25 percent above the six-month gross treasury bill rate,” BOC said. The debentures have been rated as AA by Fitch Ratings Lanka Ltd, which is one notch below BOC’s national long-term rating of AA+ (lka)/stable. BOC is Sri Lanka’s largest debenture issuer and the upcoming debenture will be its eighth rupee listing, having raised over Rs.44 billion through debentures in the past.
“During all those times the issue has been oversubscribed on the same day, which showed the high level of investor confidence enjoyed by the bank,” BOC International Treasury and Investments Deputy General Manager S.M.S.C. Jayasuriya said.
BOC expects the debentures to diversify its funding mix.

“The bank intends to utilize the proceeds of this issue to expand the loan book. During the first nine months of 2016, the loan book has grown by Rs.74 billion. The other motive behind this issue is to expand the capital base of the bank to improve the CAR and to manage the maturity mismatches in the bank’s assets and liability portfolio,” BOC added. 
BOC will structure and manage the debenture internally through its Investment Banking Division, which will also act as the registrar to the issue.
The bank’s Legal Department will act as the lawyer to the issue while the Corporate Branch will act as banker to the issue. Deutsche Bank AG, Colombo Branch will be the trustee to the issue.