Rupee debenture issue:

BOC raises over Rs 4.5 billion

H.D.H Senewiratne

The Bank of Ceylon (BOC) has already raised more than Rs 4.5 billion from the rupee debenture issue up to yesterday, which was launched on November 15 by the Main Board of the Colombo Stock Exchange (CSE)

“The opening issue is made up of 30 million debentures of Rs.100 each, amounting to Rs.3 billion, due to heavy oversubscribing the debenture were able to reach more than Rs 4 billion. We are optimistic it would reach Rs 6 billion before closing the issue within a few days time, ” BOC Deputy General Manager-International, Treasury and Investment P.A Lionel told Daily News Business .

He said they were able to raise more than Rs 4.5 billion as of yesterday and could expect it to go upto Rs six billion before the end of this week. In the event of an over subscription, further 30 million debentures will be issued to raise the tally up to Rs.6.0 billion, he said.The objective of this five year debenture issue is to improve the bank’s corporate adequacy, long term funding base and also to develop the corporate debt market, he said.

This issue, the fourth and largest issue in the financial market for a bank, aims to generate additional funds for the purpose of expansion of the advanced portfolio of the bank. Lionel also said that the corporate debt market has enormous potential in out-stations and the incentives offered from the budget for the development of the market will help to popularize it.

The debentures are rated AA (lka) by Fitch Rating (Lanka) Ltd. and the unsecured, subordinated and redeemable debentures consist of a maturity period of five years, and offer three interest payment options to investors. Several personal funds including pension, insurance funds and other various institutes and various individuals have invested in this debenture, Lionel said.

Further, money once raised will enable it to increase its tier II capital in terms of base-II and strengthen the capital base, enhance the single borrower limit, minimize the interest rate risk and gap exposures in the bank’s assets/liability portfolio.

The funds are also expected to help the bank to reduce the dependency on volatile short term borrowings etc.

They are ‘Type A-Fixed Interest Rate of 16 % per annum paid annually, or ‘Type B-Floating Interest Rate of 6 months gross treasury bill rate + 1.25%, ‘ which will be paid bi-annually and ‘Type C-Fixed Interest Rate of 15.25 % per annum paid bi-annually.