Bank of Ceylon (BoC) debenture issue, valued between Rs. 3–5 billion and managed by the Merchant Bank of Sri Lanka, has signalled the entry of the financial giant into the public domain via its CSE listing as a debenture stock, the BoC said in a press release. It will be open on October 23.
“This debut public issue by BOC is attractively structured via three interest rate options thereby appealing to all potential investors. Among its other characteristics, the debenture will be redeemable at the end of five years but due to its CSE listing and financial strength of BOC, sale anytime prior to maturity in 2013 is possible,” the release said, adding that this issue is mainly to enhance the capital structure thereby addressing the declining Capital Adequacy Ratio and providing much needed capacity to undertake incremental business. “Each Rs.1 billion of capital infusion is likely to underpin some Rs.10 billion of incremental loans and advances. Given its features, such as. unsecured, subordinated and 5-year tenure, the debentures count as Tier II Capital, thereby enhancing not only its Capital Adequacy Ratio but also the Single Borrower Limit.”
The release also said that the second purpose of the debenture issue is to convert and capitalize the BOC branch in London as a subsidiary operating under the direct supervision of the Financial Services Authority in the UK.
“The decision to go public with this debenture issue is to initiate, encourage and widen not only the investment habit among the general public in Sri Lanka but also to educate them in terms of risk and return. Investments via debt instruments of this scale carrying a variety of interest rate options are currently relatively low,” the statement said.
BOC counts the largest asset base at Rs 438 billion in 2007 representing some 25% of the total assets held by commercial banks in the country.