Archives

By Ravi Ladduwahetty

Commercial Bank of Ceylon Ltd will shortly raise Rs. 4 billion through Preference Shares and Debentures which will fund the bid for the purchase of the 90 percent divestiture of the Sri Lanka Insurance Corporation Ltd, opening of two branches of the bank in Chennai and Bangalore and also the expansion of its Information Technology infrastructure. It will also fund the medium term lending program of the bank.

The funds will be raised through Debentures worth Rs. 3 billion and a further Rs. 1 billion in Preference Shares. The issues are expected to open in April.

Commercial Bank Chairman Mahendra Amerasuriya told the Daily News yesterday that the Bank had submitted a joint proposal with the DFCC Bank for the purchase of the 90 percent equity stake of the Sri Lanka Insurance Corporation (SLICL) and that around Rs. 2 billion of the funds raised, would go for the funding of this project.

The remainder of the funding will go for the opening of two branches in Chennai and Bangalore, the provision of working capital, the expansion of the bank's Information Technology base, Amerasuriya said.

He said that the shareholders of the bank have approved the bank raising the funds through preference shares and debentures at the time their approval was sought by the Bank for the creation of the Share Trust for the employees, the five percent of the Bank's stake in the Insurance Corporation of Sri Lanka which has been repurchased at Rs. 165 per share.

It was also at the same price that the International Finance Corporation (IFC) purchased 15 percent of the Commercial Bank stake in SLICL.

Commercial Bank's Deputy General Manager Ranjith Samaranayake said that the bank has submitted the documentation to the Central Bank of Sri Lanka (CBSL) and also the Colombo Stock Exchange(CSE) and is awaiting approval.

Both instruments will be listed in the Colombo Stock Exchange so that the investors will have the exit window so that they have the option of selling their investment at the time they so desire, he said. Samaranayake also said that the Bank will go in for ratings for the Preference Share issue and the Debenture issue.

He said that a majority of the investment will go for the medium term lending program of the bank in the event the ICSL acquisition fails.

The bank has a reputation as a strong financial institution with the release of the financial results recently and should prove to be a good medium term investment.

Asked to comment on the credit ratings for both issues, Fitch Ratings Lanka Ltd Assistant Vice President Alistair Corera said: "The senior debt of the Commercial Bank is rated at AA+.

The instruments are to be issued are subordinated and therefore, the ratings for these investments would be logically lower than what has been assigned to the Bank's senior debt.

At present, there seems to be a good appetite for good quality corporate debt and these issues are bound to be welcome by the market.

This is a welcome move as it clearly differentiates the classes of instruments. With a greater number of rated instruments, one could expect the institutional investors to use them in their investment decisions, he said

News | Business | Features | Editorial | Security
Politics | World | Letters | Sports | Obituaries |

Produced by Lake House
Copyright 2001 The Associated Newspapers of Ceylon Ltd.
Comments and suggestions to :Web Manager