Fitch assigns Seylan Bank Basel III debentures National Long-Term Rating of ‘BBB(EXP)(lka)

Fitch Ratings assigned Seylan Bank PLC’s (A-(lka)/Stable) proposed Sri Lankan rupee-denominated, Basel III-compliant subordinated debentures of up to Rs.10 billion an expected National Long-Term Rating of ‘BBB(EXP)(lka)’.

The proposed debentures, which will have maturities of five and seven years, will be listed on the Colombo Stock Exchange. The bank plans to use the proceeds to strengthen its Tier 2 capital, support the expansion of its loan book and reduce maturity mismatches in the balance sheet.
The bank expects the proposed debentures to qualify as Basel III-compliant regulatory Tier 2 capital. The debentures include a non-viability clause whereby they convert to ordinary voting shares subject to the occurrence of a trigger event, as determined by the Monetary Board of Sri Lanka.

The final rating is subject to the receipt of final documentation conforming to information already received.
Fitch rates the proposed Basel III Tier 2 notes two notches below the bank’s National Long-Term Rating to reflect Fitch’s baseline notching for loss severity for this type of debt and expectation of poor recoveries. There is no additional notching for non-performance risk, as the proposed notes do not incorporate going-concern loss-absorption features.