MBSL extends closure of Rs. 1 b debenture issue again amidst poor demand

Merchant Bank of Sri Lanka and Finance (MBSL) has extended the closing date of its debenture issue for the second time amidst poor demand.

As of Friday, the multiple type debenture issue had garnered only 50 applications requesting for 151 million worth of debentures.

MBSL said it has extended the closure date of the subscription list till 10 November. It was the second extension with the first being 26 October as the issue’s original closure was 11 October.

Since 21 September MBSL has on offer five million unsecured, subordinated, redeemable five-year debentures of Rs. 100 each with an option to issue a further five million debentures in the event of an oversubscription of the initial offer making it a maximum of Rs. 1 billion.

MBSL said the second extension was due to the prevailing high interest rates, the uncertainties associated with the direction of the interest rate and current level of subscription is below the anticipated level of subscription. In addition, MBSL said few investors requested further time. Cheques submitted by investors who have already forwarded applications will be banked and MBSL will pay interest as specified in the CSE listing rules from the date of realisation of the cheques up to the date of allotment.

The debentures have been rated as “[SL] BBB” (Stable) by ICRA Lanka, the lowest eligibility criteria for such an instrument to seek a listing at the CSE.

The issue has three types of debentures: Type A offers a fixed rate of 24% per annum payable annually. Type B offers fixed rate of 23.5% payable bi-annually and Type C bears interest on the principal sum at a floating rate calculated and renewed on the basis that the effective rate of interest per annum will be equivalent to 364 days weighted average treasury bill rate plus 300 basis points subject to a cap of 29.50% per annum.

Objective of the fund raiser is to increase the medium-term fund base to match the medium to long term lending portfolio of MBSL and to enhance its total capital base. MBSL is in compliance with the CBSL’s Capital Adequacy Requirement as at 30 April 2022 and the issuance of the on-going debenture issue was to strengthen the total capital.

From January 2022 to July 2022, MBSL made a total disbursement of Rs. 14.5 billion which is an average of Rs. 2 billion for a month.

During the months of May, June and July 2022 MBSL made disbursements of Rs. 1.064 billion, 1.942 billion and 1.516 billion respectively. The drop in monthly disbursements compared to previous month/quarter is mainly due to the instability in the economic and political climate witnessed in the last few months along with the fuel shortage which affected the mobility of the customers.