MBSL completes two listed debenture issues in quick time
Wednesday, 27 November 2013 00:21
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Merchant Bank of Sri Lanka PLC (MBSL) acted as Managers to the L B Finance PLC – Rs. 2 billion listed debenture issue and for the Arpico Finance Company PLC – Rs. 300 million listed debenture.
Fund raising for both institutions’ debt issues were in a manner that will not overlap investor perceptions given the market liquidity situation challenging the fund raising process. Nevertheless, both issues were oversubscribed, supporting the intended objectives of the debt issues.
Many fixed income investors preferred listed debenture issues due to the tax benefit than unlisted debentures. At the beginning of the year, first debenture under the new tax regulations of ‘no withholding tax on listed debentures’ was commenced by MBSL with the Rs. 500 million Commercial Credit and Finance PLC debenture issue. This was followed by the MBSL’s own debenture of Rs. 2 billion in March 2013.
LB Finance
On the LB Finance PLC debenture issue, three types of debentures were offered to the prospective investors. The entity was A- rated and the instrument was BBB+ rated by Ram Ratings (Lanka) Limited.
Funds were raised for the purpose of expansion and strengthening of the capital base of the company for its expansion strategy and to maintain the capital adequacy requirements as stipulated by CBSL.
Further, it will minimise the interest rate risk and the gap exposure that could be present.
Arpico Finance Company
On the Arpico Finance Company PLC debenture issue, two types of debentures were offered for the investors. Company rating was BB and the instrument rating was BB- issued by the Ram Ratings (Lanka) Ltd. However, the fund raising is expected to improve the ratings in the near future.
The debt raising will support the company’s liquidity position and is expected to support the future growth strategies. Expansion of the branch network including supporting the company’s overall future requirements is key thoughts behind the fund raising.
Unique strategies
The LB Finance PLC debenture issue was subscribed mainly by institutional investors providing them a good investment opportunity to lock in their long term funds on a more secured investment.
On the other hand, Arpico Finance Company PLC’s debenture issue was focused mainly on the retail market and relatively small valued investors.
As such, the strategies adopted by MBSL for fund raising for both debentures are unique and different which was challenging in the current era but the outcome was fruitful.
