BOC rupee debenture issue 2012

Giant Debenture
Bank of Ceylon the largest Sri Lankan commercial bank opens the subscription list of its public issue of debentures on the 15th November 2012. These debentures are rated AA(lka) by Fitch rating (Lanka) ltd, unsecured, subordinated and redeemable on maturity after five years and will be listed on the main board of the Colombo Stock Exchange. The issue is for ...http://www.lbt.lk/news/market/2970-giant-debenture

By Ravi Ladduwahetty

The Rs. 3 billion Bank of Ceylon (BOC), debenture issue, which opens today, is expected to be lapped up by local insurance corporates and Pension Funds , top officials told The Island Financial Review yesterday on the sidelines of a news conference to announce the issue.

The issue is for 30,000,000 debentures of Rs.100.00 each, amounting to Rs.3.0 billion with an option to issue further 30,000,000 debentures to raise up to Rs.6.0 billion in the event of an over subscription.

These debentures are rated AA(lka) by Fitch ‘Rating (Lanka) Ltd, unsecured, subordinated and redeemable on maturity after five years and will be listed on the Main Board of the Colombo Stock Exchange.

" We are very confident that the issue will be oversubscribed on opening and it will be the insurance corporates in Sri Lanka and Pension Funds which have evinced firm interest," Bank of Ceylon Gamini Wickremasinghe told The Island

He also said that the debenture will not only increase the lending portfolio which will revolve round agriculture and Tier II capital. " The demand for fisheries have agriculture have grown phenomenally, he said.

Bank of Ceylon Additional Manager ( Treasury and Investment) P.A. Lionel said that there were quite some interest evinced by investors in Hong Kong but they were not firm.

Explaining the details, BoC Chief Financial Officer Asoka Rupasinghe told the media that the five year debentures have three interest payment options to suit the investor appetite i.e. Type A-Fixed Interest Rate of 16.00% p.a. paid annually or Type B – Floating Interest Rate of 6 months gross treasury bill rate + 1.25% paid bi-annually or Type C-Fixed Interest Rate of 15.25% p.a. paid bi-annually. Non-residents are also allowed to apply for any type of debentures provided funds are remitted through proper channels,

Continuing, he said: " Investment Banking Division of the Bank of Ceylon acts as the manager, banker and registrar to the issue as an one stop shop while Deutsche Bank AG, Colombo branch is at trusteeship. With this debenture issue the Bank of Ceylon displays again its capability and availability of infrastructure to structure, manage and maintain debt market instrument through its Investment Banking Division.

The bank has revisited the Corporate Strategy keeping in mind the huge potential for business development in the country, North and East in particular, after the end of war and now focused on undertaking new business to move away from traditional banking business. This debenture issue would generate additional funds for the purpose of expansion of advances portfolio of the bank which will contribute to growth of the Sri Lankan economy in turn. In view of the requirement of investments around 35% of the GDP by public and private sector to maintain economic growth of the country at present level significance of this debenture issue could be identified.

The issue will enable the bank to increase tier II capital in terms of Basel-II, strengthen the capital base, enhance the single borrower limit, minimize the interest rate risk and gap exposures in the bank’s assets/liability portfolio, reduce the dependency on volatile short term borrowings. Above all the long term fund base raised through this debenture issue could effectively be utilized to finance the long term financial needs in the priority sectors of the country’s economy such as exports, agriculture, tourism, infrastructure/ manufacturing industry and SME etc. The debenture issue will also provide and excellent opportunity for the investors to earn an attractive, regular return over a period of five years at a minimal risk.
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