BOC to raise Rs.5bn via bonds with equity characteristics to beef up Tier I capital

Bank of Ceylon (BOC) announced the issuance of bonds with near characteristics to shares to bolster its additional Tier I capital by up to Rs.5.0 billion. 

To this effect, the bank will initially issue 30 million BASEL III-compliant perpetual bonds at a nominal value of Rs.100 with the option to issue up to a further 20 million bonds in the event of an over subscription of the initial tranche. 

The bonds will not be listed on the Colombo Stock Exchange. 

The interest on the bonds will be calculated based on the 12-months net Treasury bill rate, plus 1.50 percent with a floor of 9.50 percent, and be paid annually to the bond holders. 

The bonds, unlike most others, are irredeemable, and subject to call option, which is at the discretion of the Monetary Board. 

“The bonds may be callable by the bank at its discretion at any time after the expiry of five (5) years from the date of issue, subject to the approval of the Monetary Board of the Central Bank of Sri Lanka (CBSL) and other conditions,” the bank said in a statement. 

By March 31, 2020 BOC had 11.05 percent of Tier I capital ratio and 15.43 percent of Tier II or total capital ratio, above the regulatory minimums of 10 percent and 14 percent for each.

As banks operate with adequate liquidity and market is also flushed with liquidity, the bond issuance could be taken up fast. 

The Tier I capital base of BOC is Rs.127.6 billion. 

The issue opened yesterday and is set to close on July 14 or an earlier date when it is fully taken up.