MBSL to raise Rs. 1 b via listed debenture issue

Merchant Bank of Sri Lanka and Finance Plc (MBSL) has announced a listed debenture issue to raise a maximum of Rs. 1 billion.

It will issue 5 million unsecured, subordinated, redeemable, listed debentures of Rs. 100 each with an option to offer an equal amount in the event of an oversubscription of the initial amount.

Type A debentures would be at a fixed coupon rate of 24.00% p.a. payable annually, Type B debentures at a fixed coupon rate of 23.50% p.a. payable bi-annually (AER of 24.88%) and Type C debentures at a Floating Rate of 364 days weighted average treasury bill rate plus 300 basis points subject to a cap of 29.50% per annum, payable quarterly.

The official opening of the issue is 21 September but the public can start subscribing from today.

The Colombo Stock Exchange has approved in principal an application for listing the debentures.

As at 30 June 2021, MBSL over 80% control is held by Bank of Ceylon, had Rs. 35.5 billion in assets up by 3.7% from end 2021 and liabilities amounted to Rs. 31.6 billion, up by 5.2% from end 2021.

At Company level income rose by 3% to Rs. 3 billion in 1H of 2022 whilst total operating income declined by 21.6% to Rs. 1.2 billion and net operating income by 27% to Rs. 938 million. Operating expenses rose by 15% to Rs. 1.15 billion. Resultantly MBSL posted an operating loss of Rs. 214 million in 1H of 2022 as against a profit of Rs. 296 million a year ago. Pre-tax loss was Rs. 382 million as against a profit of Rs. 169 million and after tax loss was Rs. 384 million as against a profit of Rs. 142 million.

In FY21, net interest income rose by 101% to Rs. 2.8 billion whilst MBSL succeeded in posting an operating profit before tax of Rs. 1.1 billion as against a loss of Rs. 885 million in FY20. Pre-tax profit was Rs. 813 million in comparison to Rs. 1.3 billion loss and after tax profit was Rs. 529 million as against loss of Rs. 1.1 billion in FY20.

In mid-last year MBSL raised Rs. 2.15 billion via a Rights Issue. The issue on the basis 9 new shares for every 4 held, amounted to 373.2 million ordinary voting shares at Rs. 6 each. Proceeds from the rights were used for lending purposes of MBSL.

In November last year ICRA Lanka reaffirmed the issuer rating of MBSL at [SL]BBB+. The outlook was revised to Stable from Negative. ICRA Lanka also reaffirmed the issue rating of Rs. 2,000 million Subordinated Unsecured Redeemable Debenture Program at [SL]BBB whilst revising the outlook to Stable from Negative.