BOC to float Rs. 8 b debenture, Fitch rates ‘AA (EXP)’
Friday, 4 July 2014 00:54
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Fitch Ratings Lanka has assigned Bank of Ceylon’s (BOC; BB-/Stable) proposed subordinated debentures of up to Rs. 8 b an expected National Long-Term Rating of ‘AA(lka)(EXP)’.
The debentures, which have tenors of five and eight years and carry fixed and floating coupons, 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 subject to the receipt of final documentation conforming to information already received.
BOC’s National Long-Term Rating reflects the Government of Sri Lanka’s (BB-/Stable) high propensity but moderate ability to provide support to the bank under extraordinary situations. The State’s high propensity stems from BOC’s high systemic importance as the largest bank in Sri Lanka, its quasi-sovereign status, its role as a key lender to the Government and full Government ownership. The State’s moderate ability to provide support is reflected in the sovereign rating.
The proposed debentures are rated one notch below BOC’s National Long-Term Rating to reflect their subordination to senior unsecured creditors and gone-concern loss-absorption quality in the event of liquidation, in line with Fitch’s criteria for rating such securities.
Any change in Sri Lanka’s sovereign rating or the perception of State support to BOC could result in a change in BOC’s National Long-Term rating and issue ratings. Visible demonstration of preferential support for BOC in the form of an explicit guarantee will be instrumental to an upgrade of its National Long-Term Rating.
A full list of BOC’s ratings
Long-Term Foreign Currency IDR: ‘BB-’; Outlook Stable
Long-Term Local Currency IDR: ‘BB-’; Outlook Stable
Short-Term Foreign Currency IDR: ‘B’
Viability Rating: ‘b+’
Support Rating:’3’
Support Rating Floor: ‘BB-’
US dollar senior unsecured notes: ‘BB-’
National Long-Term Rating: ‘AA+(lka)’; Outlook Stable
Outstanding Sri Lanka rupee-denominated subordinated debentures: ‘AA(lka)’
Proposed Sri Lanka rupee-denominated subordinated debentures: ‘AA(lka)(EXP)’
