HNB Debenture Issue

udeni · 1 HNB Debenture Issue Mon May 20, 2013 4:51 pm

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http://www.cse.lk/cmt/upload_cse_announcements/6771369044343_.pdf

Debt securities to be offered is subordinated debentures. Isn't the risk higher in such securities. I am under the understanding that in case of liquidation subordinated debenture holders are settled after the other debtors and lenders are settled. Your views pl.

sriranga · 2 HNB’s Rs. 4 b debenture issue opens 6 June Tue May 21, 2013 1:25 am

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HNB’s Rs. 4 billion listed debenture issue will have its official opening on 6 June whilst the public can begin subscribing to it from 28 May.

This is following the Colombo Stock Exchange approving in principle an Application for listing the debt securities of the Bank on the Main Board.

HNB will issue 20 million Unsecured, Subordinated, Redeemable Debentures at Rs. 100 each with an option to issue up to a further 20 million debentures in the event the initial offer is oversubscribed.

Managers to the issue is Acuity Partners Ltd. and SSP Corporate Services is the Registrars to the Issue.

Fitch has assigned A+ rating to HNB’s latest debentures. They are rated one notch below HNB’s National Long-Term rating of ‘AA-(lka)’ to reflect their subordinated status. The debentures have a five-year tenure with bullet principal repayment at maturity. Coupon payments are at a fixed rate, and paid annually, helping the bank to reduce its exposure to interest rate risk.

HNB is to use the proceeds to fund its projected lending activities and to strengthen the bank’s regulatory Tier 2 capital base.
http://www.ft.lk/2013/05/21/hnbs-rs-4-b-debenture-issue-opens-6-june/

hettdas · 3 Re: HNB Debenture Issue Tue May 21, 2013 8:27 am

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udeni wrote:http://www.cse.lk/cmt/upload_cse_announcements/6771369044343_.pdf

Debt securities to be offered is subordinated debentures. Isn't the risk higher in such securities. I am under the understanding that in case of liquidation subordinated debenture holders are settled after the other debtors and lenders are settled. Your views pl.

You are correct... Read below...

What It Is:

Subordinated debt is any outstanding loan that, should the borrowing company fail, it will be repaid only after all other debt and loans have been settled. It is the opposite of unsubordinated debt.

How It Works/Example:

Should an individual or company file for bankruptcy, the court will prioritize the outstanding loans which the liquidated assets will repay. Any debt with lesser priority qualifies as subordinated debt.

udeni · 4 Re: HNB Debenture Issue Tue May 21, 2013 9:25 am

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Thanks sriranga and hettdas.
As HNB debenturers are subordinated they should pay a higher interest to lenders to cover the risk. (or step motherly treatment?)

salt · 5 Re: HNB Debenture Issue Tue May 21, 2013 10:29 am

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Fitch has assigned A+ rating to HNB’s latest debentures. They are rated one notch below HNB’s National Long-Term rating of ‘AA-(lka)’ to reflect their subordinated status

its A+ ratings
all listed bank debts are subordinated debt, they need to cover up capital shortfall in tier 11

udeni · 6 Re: HNB Debenture Issue Tue May 21, 2013 11:12 am

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salt,
In March 2013 the debenture issue that was held by MBSL was not subordinated.

http://www.cse.lk/cmt/uploadAnnounceFiles/4011362974405_380.pdf

It was oversubscribed on the first day of opening.

salt · 7 Re: HNB Debenture Issue Tue May 21, 2013 11:28 am

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udeni,
MBSL is not a commercial bank, its specialized bank (LSB)

udeni · 8 Re: HNB Debenture Issue Tue May 21, 2013 11:35 am

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Thanks salt.

yaka · 9 HNB debenture issue Mon May 27, 2013 1:12 pm

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do u guys think its worth 14% pa for subordinate debenture and minimum of 1mn.need advice
http://www.cse.lk/pdf/HNB-Debenture-Issue-2013-Prospectus-Final-220513.pdf

salt · 10 Re: HNB Debenture Issue Mon May 27, 2013 1:57 pm

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rate is not attractive
but rates are moving down, so its in line with market
debenture era is gone
thankfully, i placed some when rates are above 16.0%

yaka · 11 Re: HNB Debenture Issue Mon May 27, 2013 2:02 pm

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salt wrote:rate is not attractive
but rates are moving down, so its in line with market
debenture era is gone
thankfully, i placed some when rates are above 16.0%

i think debenture era is yet to come with sec planing to promote debenture trading in cse actively.

salt · 12 Re: HNB Debenture Issue Mon May 27, 2013 2:07 pm

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they have been trying this since 1990
debentuers were listed for more than 10 years
first of all, they should try to get most liquid assets - GOSL treasuries to be gradable which is not yet accomplished