Fitch rates Bank of Ceylon’s senior notes BB-(EXP)

Fitch Ratings has assigned Sri Lanka-based Bank of Ceylon’s (BOC) proposed issue of senior unsecured notes an expected rating of ‘BB-(EXP)’.

The final rating is contingent upon the receipt of final documents conforming to information already received.

The notes will have a maturity of five years and coupon payments will be at a fixed rate on a semi-annual basis. The issue proceeds will be used for BOC’s refinancing and growth requirements and also for lengthening the maturity profile of its foreign currency liabilities.

The notes are rated at the same level as BOC’s long-term foreign currency Issuer Default Rating (IDR) as they will constitute direct, unsubordinated and senior unsecured obligations of the bank and will rank equally with all its other unsecured and unsubordinated obligations.

BOC’s long-term IDR is driven by the Government of Sri Lanka’s high propensity but somewhat limited ability to provide timely support to the bank at times of distress. In Fitch’s view, the state’s high propensity stems from BOC’s systemic importance as the largest bank in the country; accounting for nearly 20% of the banking system’s deposits and assets, its quasi-sovereign status, its role as a key lender to the government and full government ownership. The state’s limited ability is reflected in the ‘BB-‘/stable sovereign rating.

Any change in Sri Lanka’s sovereign rating or the propensity of state support to BOC could result in a change in BOC’s IDR.