Bank of Ceylon to open Rs. 8 billion debenture subscription tomorrow

Bank of Ceylon - BOC

The Bank of Ceylon is opening the subscription list of its 8th listed Rupee debenture issue on Wednesday, 21st December.

“Bank of Ceylon is the largest issuer of debentures in the Sri Lankan Debt market with over 77 years of trust, stability and leadership in the Sri Lankan banking industry, the Bank has successfully raised over Rs. 44 billion by issuing debentures in the market. 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”, stated the Deputy General Manager- International, Treasury and Investments S.M.S.C. Jayasuriya.

Bank intends to utilize the proceeds of this issue to expand the loan book. During the first 9 months of 2016 the loan book has grown by Rs. 74 billion. Even though there are multiple sources of funds, such as different types of deposits and borrowings to fund the bank’s expansion strategy, mobilizing medium term funds through debentures would diversify bank’s funding mix. The other motive behind this issue is to expand the capital base of the bank to improve CAR and to manage the maturity mismatches in bank’s assets and liability portfolio.

This is a rated, unsecured, subordinated, redeemable debenture that will be listed on the Colombo Stock Exchange (CSE). The debenture is rated AA by Fitch Ratings Lanka Ltd, that is one notch below the BOC’s National Long-Term Rating of AA+ (lka)/stable.

The debenture issue is for an offering of Rs. 5 bn. with the option to increase it up to Rs. 8 bn. in the event of an oversubscription. The debentures are offered in four types to meet diverse investor requirements with five years and eight years maturities and fixed & floating coupon rates.

Fixed coupon rate of the five-year debenture will be 13.25 percent while the eight-year debenture will be 12.75 percent. Floating coupon rate of both five-year and eight-year debentures will be 1.25 percent above the six-month gross Treasury Bill rate.

The issue price of a debenture is Rs. 100 and an investor is required to invest in a minimum of 100 debentures (Rs. 10,000).

BOC Debentures will provide the investors with an attractive interest income throughout the investment period. Investing in debentures will provide them the opportunity to diversify their investment portfolios.

As the debentures will be listed on the CSE there will be a secondary market for the investors and hence investors will be able to exit from the investment at any time, and could realize capital gains according to interest rate fluctuations in the financial markets. Further, investors will get the opportunity to obtain credit facilities from banks and financial institutions by offering their debentures as collateral.

Similar to our previous issues, this 8th public debenture issue is also structured and managed by the Investment Banking Division of the bank. Legal Department acts as lawyers to the issue while Corporate Branch acts as bankers to the issue. Investment Banking Division continues to be the registrars for the proposed issue, while Deutsche Bank AG, Colombo branch is acting as the trustee to the issue.

The debenture is priced considering the high credit worthiness indicated by the issue rating of AA affirmed by Fitch Ratings Lanka Ltd., the minimal risk involved in the investment and the strong franchise enjoyed by BOC.

Applications and prospectus containing details of the debenture issue are now available at all trading members and the members (stock brokers) of the CSE and can be downloaded from the web sites of the CSE; and the web site of BOC;

Duly completed application forms should be enclosed in an envelope marked ‘BOC Debenture Issue’ together with the remittance for the full amount payable on application and delivered to Investment Banking Division at 11th Floor of BOC Head Office or collection points mentioned in the prospectus.

(Source: The Island)