Wednesday, 13 August 2014 00:04
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DFCC Bank’s Rs. 5 billion debenture issue had been oversubscribed by two times generating a demand of over Rs. 10 billion.
The issue of 30 million senior, unsecured, redeemable, rated debentures of Rs. 100 each with an option of a further 20 million debentures in the event of an oversubscription of the original amount, was closed on Friday on its official opening day.
The three-year debenture issue offered three options of interest payment for investors. The biggest demand was for Option A (8.50% payable annually) which drew 77 applications worth Rs. 8.07 billion. Around 70 applications were with payment made by cheques and RTGS.
Option B (8.33% payable semi annually) attracted 33 applications worth Rs. 1.43 billion and Option C (8.24% payable quarterly) saw 34 applications worth Rs. 837 million.
The funds were raised at a coupon rate substantially lower than previous issues in the market. It was also the first single-digit Issue for a non-State entity. This was viewed by DFCC as a great achievement.
“The success of this Issue will provide a good platform for the bank to build on its strong performance and successfully pursue its growth strategies during the year,” DFCC Bank’s CEO Arjuna Fernando said.
The main objective in launching this Issue was to strengthen the bank’s funding base whilst mitigating DFCC’s interest rate risk by reducing liquidity mismatches. In addition, the Issue will also supplement the diversification of the borrowing base and further strengthen the SME loan portfolio through the ability to offer fixed rates of interest.
Rated AA- by Fitch Ratings, this public issue was attractively structured giving investors the opportunity to select between three options.
The funds raised from this Issue will be utilised for the medium to long term lending activities of the bank, whilst mitigating DFCC’s interest rate risk by reducing maturity mismatches. In addition it will supplement the diversification of the borrowing base and further strengthen the SME loan portfolio through the ability to offer fixed rates of interest.
The issue was structured by the Long-Term Funding and Capital Markets Division of the bank and managed by Capital Alliance Partners Ltd., while the Registrar to the issue is SSP Corporate Services Ltd.
