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| Thursday, 2 September 2004 |
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AA (sri) Rating for Commercial Bank's Debentures Fitch Ratings Lanka Ltd (FRL) has assigned a AA (sri) national rating for the proposed private placement of Rs 1,000 million of 2004/2009 Unsecured Subordinated Redeemable Debentures of Commercial Bank of Ceylon Ltd. (CB). The Subordinated Debentures in terms of priority, will be subordinate to deposits and all senior debt obligations, but will rank above the preference and ordinary shares. Consequently, and in accordance with FRL's criteria, the rating assigned for the Subordinated Debentures is one notch lower than CB's implied senior debt rating of AA+ (sri). AA (sri) rating denotes a very low expectation of credit risk. It indicates very strong capacity for timely payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events. The funds raised will supplement deposit mobilisation and help fund the expansion of its loan book. The issue also qualifies as Tier II capital, therefore will strengthen CB's regulatory capital. CB's CAR ratio as at end June 2004 was estimated at 13.55%. (Tier 1 - 11.07%). However, FRL is of the view that CB's reported total CAR is understated, given that the bank's redeemable preference share capital, although in substance similar to subordinated debt, is excluded in calculating regulatory capital. With assets of Rs 123 billion as at June 2004, CB is the fourth largest commercial bank in the system. Established in 1969, the bank's traditional focus was trade finance and corporate banking, but has since focussed on expanding its SME and consumer banking segments as well. |
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