Valentine’s Day opening for Seylan Bank’s Rs. 2 b listed debenture issue

Seylan Bank Plc has obtained CSE approval to issue 10,000,000 unsecured subordinated redeemable five year debentures of Rs. 100 to raise Rs. 1 billion, and in the event of over subscription, to issue a further Rs. 1 billion, taking the total issue to Rs. 2 billion. The issue will open on 14 February 2013.

The proposed debenture issue will consist of three types of debentures, where a fixed interest rate is paid either annually, semi-annually or monthly. The instrument where interest is paid annually will yield a interest rate of 15.50%, while the instrument where interest is serviced semi-annually will be at a interest rate of 15.00% (AER 15.56%) and the monthly interest serviced instrument will be at a interest rate of 14.50% (AER 15.50%).

The minimum subscription of the issue will be 1,000 debentures of Rs. 100 each (Rs. 100,000) and thereafter in multiples of 100 debentures of Rs. 100 each (Rs. 10,000).

This debenture issue will be one of the first issues to take advantage of the 2013 Budget tax concession, where listed corporate debt securities (debentures) issued after 1 January 2013 will be exempted from WHT and income tax. Hence, at present there is tremendous interest shown with regard to this issue.

The issue will assist the bank to expand its capital base in order to maintain a healthy capital adequacy ratio in anticipation of ambitious credit growth targets.  It will also assist to broad base the Tier 2 capital base of the bank. The issue will also assist to increase the medium term funding base to match the medium term lending of the bank, while providing investors an opportunity to earn a regular fixed income over the next five years.

Seylan recorded an impressive Q3 performance with profits before VAT and income tax reaching Rs. 3,130 million for the nine months ended 30 September 2012. Profit before VAT and income tax rose to Rs. 3,130 million as opposed to Rs. 1,424 million (before the exceptional VRS costs), a 120% growth over the corresponding period last year. Profits after tax for the nine months increased to Rs. 1,604 million from Rs. 303 million recorded last year.

The issue will be managed by Kenanga Investment Corporation Ltd., while the Registrars to the issue will be PW Corporate Secretarial Ltd., Trustee to the issue will be Deutsche Bank AG and the Bankers to the issue Seylan Bank.