BOC goes for Rs. 8 b listed debenture; Fitch rates ‘AA(EXP)’
Friday, 13 September 2013 03:26
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Fitch Ratings Lanka has assigned Bank of Ceylon’s (BOC; BB-/Stable) proposed subordinated debentures of up to Rs. 8 billion an expected National Long-Term rating of ‘AA(lka)(EXP)’.
The debentures are to be listed on the Colombo Stock Exchange. BOC expects to use the proceeds to strengthen the bank’s regulatory Tier 2 capital base and reduce asset and liability maturity mismatches.
The final rating is pending final documents that confirm information already received, including details about the amount and tenor. A full rating breakdown is provided at the end of this commentary.
The proposed debentures are rated one notch below BOC’s National Long-Term Rating of ‘AA+(lka)’ to reflect their gone-concern loss-absorption quality in the event of a liquidation, in line with Fitch’s criteria for rating such securities.
Key rating drivers: BOC’s Long-Term Rating is driven by the Government of Sri Lanka’s high propensity but moderate ability to provide support to the bank under extraordinary circumstances. In Fitch’s view, the state’s high propensity to support BOC stems from the bank’s systemic importance as the largest bank in the country, its quasi-sovereign status, its role as a key lender to the Government and full Government ownership. The state’s moderate ability to provide timely support to BOC is reflected in the ‘BB-’/Stable rating.
Rating sensitivities: Any change in Sri Lanka’s rating or the perception of state support to BOC could result in a change in BOC’s National Long-Term Ratings. The subordinated debt rating will move in tandem with the Long-Term Ratings.
Box
Full list of BOC’s ratings:
Long-term Foreign- and Local-Currency Issuer Default Ratings: ‘BB-’; Outlook Stable
Viability Rating: ‘b+’
Support Rating: ‘3’
Support Rating Floor: ‘BB-’
USD senior unsecured notes: ‘BB-’
National Long-Term rating: ‘AA+(lka)’ ; Outlook Stable
Outstanding subordinated debentures: ‘AA(lka)’
