BOC debenture issue tops Rs. 4.5 b

Wednesday, 21 November 2012 01:00 - - {{hitsCtrl.values.hits}}

Industry giant Bank of Ceylon’s mega Rs. 6 billion debenture issue had crossed the Rs. 4.5 billion mark as at Monday.

The bank said it had received 125 applications requesting for Rs. 4.588 billion worth of debentures. The issue of 600 million listed unsecured, subordinated and redeemable debentures at Rs. 100 each opened on 14 November and crossed the first threshold of Rs. 3 billion.

The issue had the option of exercising the full amount in the event of the first Rs. 3 billion was oversubscribed, which happened on the official opening day itself.

Debentures offer a choice of returns. One is a fixed interest rate of 16% p.a. paid annually, a floating interest rate of six months gross T-bill rate + 1.25% paid biannually, or fixed interest rate of 15.25% p.a. paid biannually.

The issue’s objective is to increase tier II in order to enhance its capital adequacy ratio and single borrower limit and to minimise the interest rate risk and gap exposure in the bank’s assets/liability portfolio i.e. lending for three to five years with fund raised through five-year debentures, reducing dependency on the volatile short-term borrowings.

Out of the proceeds, Rs. 2 billion will be utilised for the retirement of existing debentures issued at 8.77% p.a. which are maturing this month and the balance will be utilised for the expansion of loan book, reducing the dependency on short-term borrowings.

The long-term funds raised through the issue could effectively be utilised to finance the long-term financial needs in the priority sectors of the economy such as exports, agriculture, tourism, infrastructure, manufacturing, and SMEs.