NDB’s debenture issue up to Rs.10bn assigned ‘BBB(EXP)(lka)’

Fitch Ratings has assigned National Development Bank PLC’s (NDB) 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)’ and placed it on RWN. 
The proposed debentures will mature in five years and will be listed on the Colombo Stock Exchange. The bank plans to use the proceeds to strengthen its Tier 2 capital base as well as to support its loan growth. 

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 will convert to ordinary voting shares subject to the occurrence of a trigger event, as determined by the Monetary Board of Sri Lanka. 

Fitch said the final rating is subject to the receipt of final documentation conforming to information already received. 
Fitch has rated the proposed Basel III Tier 2 notes two notches below NDB’s National Long-Term Rating of ‘A-(lka)’, which is on RWN. 
 “This reflects Fitch’s baseline notching for loss severity for this type of debt and our expectations of poor recoveries. There is no additional notching for non-performance risks as the notes do not incorporate going-concern loss-absorption features,” Fitch said.