Pan Asia Bank’s Rs.4 bln debenture to open this week
View(s):Pan Asia Banking Corporation PLC (Pan Asia Bank) this week announced the opening of its Rs. 4 billion senior debenture issue for subscription on September 23, the second such corporate debt issuance by the bank in 12-months.
The bank issued a 5-year, Rs.3 billion subordinated debenture on October 24, 2014 which was oversubscribed on the opening day itself due to the strong investor confidence on the bank and its debt instruments, a bank statement to the media said.
Bank’s Deputy General Manager Treasury, Richie Dias said the debenture proceeds would be used mainly to support the growth in its lending book.
“Pan Asia Bank has seen a significant growth in its balance sheet recently. During the first half of 2015 (1H’15), our advances grew by over 13 per cent. While the bulk of this growth was funded via deposits, we are also looking to raise medium term funds through a debenture to further expand our loan book. So, this will not just diversify our funding mix but also will enable us to lock-in guaranteed funding for the medium term,” he said.
Pan Asia has seen good results. During the six months ended June 30, 2015, the bank grew its after tax profits by as much as 156 per cent year-on-year to Rs. 451 million – higher than the after tax profit achieved by the bank for the full 2014 financial year.
Fitch Ratings Lanka assigned an instrument rating of BBB on the debenture.
The statement said the initial issue of Rs.2 billion will be upsized by the bank by another Rs.1 billion in the event of the initial tranche being oversubscribed. The bank will further upsize the issue by Rs.1 billion, provided the second tranche being oversubscribed.
Pan Asia Bank’s debenture issue offers four options for the investors between floating and fixed interest rates under two tenors to choose from, depending on their risk appetite. Fixed rate, 3-year debenture will carry an interest rate of 9.50 per cent (Annual Effective Rate of 9.7256 per cent) while the 4-year debenture will carry 10 per cent interest rate (10.25 per cent AER).
According to Mr. Dias, investing in debentures will have many benefits to the prospective investor apart from the bi-annual interest receipts. “Debenture interest is free from income tax as well as from the withholding tax. Further, corporate debenture is a liquid investment as the debentures are listed on the CSE for trading,” he added.
Further the debentures may also be used as collateral to obtain credit facilities from financial institutions and banks when required.