ComBank announces plans to raise up to Rs.12bn via debenture issue

• This marks Commercial Bank’s second debenture issue in rapid succession
• In December, last year, ComBank raised Rs.10bn through a debenture offering
• Debentures will have a non-conversion feature for tenures of 5 years, 7 years and 10 years

Sri Lanka’s largest private lender in terms of assets, Commercial Bank of Ceylon PLC, yesterday revealed plans to raise up to Rs.12 billion through a listed debenture issue.

The board of directors of the bank, at a meeting held on July 28, adopted a resolution to issue 60 million listed, unsecured, rated, redeemable, subordinated, Basel III-compliant, Tier 2 debentures of Rs.100 each, with a non-conversion feature, for tenures of five years, seven years and 10 years, with an option to issue up to a further 60 million debentures in the event of an oversubscription. 

The bank said the issue is subject to obtaining all necessary regulatory and shareholder approvals.

This marks Commercial Bank’s second debenture issue in rapid succession. In December, last year, the bank successfully raised Rs.10 billion through a debenture offering that was oversubscribed on its opening day, closing within hours of being made available.

Although the domestic debt restructuring plan approved recently has little impact on the banks directly, their capital adequacy remains under pressure amid stressed loan quality, weak domestic economy and currency and their exposure to sovereign’s foreign currency-denominated debt, which will be subject to restructuring. 

Also, the banks are required to strengthen their capital buffers in preparation for the anticipated surge in loan demand, starting from the fourth quarter. This increase in loans is expected to be driven by the improvement in economic conditions and a downward trend in interest rates.

Credit extended by commercial banks to businesses and individuals contracted for the 12th consecutive month in May.