NDB’s Rs.5bn debenture issue oversubscribed on opening day

The Basel III compliant Rs.5 billion debenture issue of National Development Bank PLC was oversubscribed yesterday, which was the official opening day of the issue. 
In an environment where a few other banks were also issuing similar debt instruments at attractive interest rates, it is noteworthy that NDB was able to successfully conclude its debenture issue. The bank issued 50 million BASEL III compliant Tier 2 listed, rated, unsecured, subordinated, redeemable debentures with non-viability conversion debentures at 
Rs.100 each.
NDB’s debenture issue presented two interest rate options— Type A offered a five-year tenor fixed coupon rate of 15 percent per annum payable annually, while Type B provided a five-year tenor fixed coupon rate of 14.22 percent per annum payable quarterly.

NDB had initially planned to raise these funds through a debt issue at approximately 24 percent a few months ago. However, the bank deferred its plans, anticipating a decline in interest rates.  According to NDB sources, this strategic delay resulted in significant interest expense savings, estimated at around Rs.450 million per year.
The bank intends to utilise the proceeds from this issue to enhance and fortify its Capital Adequacy Ratio in accordance with BASEL III guidelines and to support the future expansion of the bank’s business activities.