To raise up to Rs.10bn via equity-like bond

Hot on the heels of selling an equity-like bond to raise Rs.5.0 billion a few months ago, Bank of Ceylon (BOC) once again is offering a similar featured bond to raise another Rs.10.0 billion to bolster its capital. 

BOC announced last week that it is initially issuing 30 million bonds at Rs.100 each with characteristics of BASEL III complaint, rated, unlisted, unsecured, subordinated, perpetual, additional Tier I capital bonds with an option to issue up to further 70 million bonds from the same class at the discretion of the bank in the event of an over-subscription of the initial tranche. The bank’s desire to strengthen its capital demonstrates that it remains bullish on future loan growth, while maintaining its minimum capital adequacy ratios above the regulatory minimums. 

Meanwhile, the funds are also required for the bank to remain capital savvy to fund projects and segments of the economy, which are prioritised by the government as part of its development agenda as articulated in the President’s policy framework, ‘Vistas of Prosperity and Splendour’, and reinforced by the Budget for 2021 presented in parliament last week. The bond issue is scheduled to open on December 1, 2020 and will remain open till December 31, 2020, to which 
ICRA Lanka Limited assigned AA (hyb) rating with a Negative outlook. 

The bank will pay interest annually at weighted average 12-months net Treasury bill rate plus 1.50 percent with a floor rate of 9.00 percent. 

By the end of September, the bank had a Common Equity Tier I ratio of 9.97 percent, Tier I capital ratio of 10.37 percent and Tier II or total capital adequacy ratio of 14.04 percent while the minimum requirements under each were 7.50 percent, 9.00 percent and 13.00 percent.