HNB strikes US $ 50mn private placement deal with Asian Development Bank

Hatton National Bank PLC (HNB), the country’s second largest private bank in terms of assets, has struck a private placement deal with the Manilabased development financier, Asian Development Bank (ADB), to strengthen its capital base.

To this end, HNB will issue ordinary voting shares of the bank to the value of US $ 50 million at the exchange rate existing at the time of the deal or ordinary voting shares equivalent to 9.9 percent of the total ordinary voting shares of the bank after the issue of such shares, whichever is lower, to ADB. HNB will call an extraordinary general meeting (EGM) to obtain the shareholder acquiescence in this regard. The shares will be issued at an average price at which the shares of HNB traded on the Colombo bourse during the 30-market day period immediately preceding the date of the EGM. The shares will be issued at Rs.220 if the average price is more than Rs.220 and at Rs.190 if the average price is less than Rs.190. The HNB share closed at Rs.187 on Wednesday’s trading. “The board of directors has opined that the aforesaid consideration for which the ordinary voting shares of the bank are to be issued to ADB through a private placement is fair and reasonable to the bank and to all existing shareholders of the bank,” a stock exchange filing by HNB said.

The bank said the proceeds of the private placement would be utilized to strengthen its capital base and support its overall business growth. As of June 30, HNB’s Tier I (core) capital adequacy ratio stood at 9.77 percent, down from 10.53 percent six months ago while Tier II capital adequacy was at 12.97 percent, slightly improved from 12.70 percent, helped by a Rs.7 billion debenture issue in March. The bank recently announced another debenture issue up to Rs.6 billion to support its Tier II capital. Apart from the shareholder nod, the private placement of shares is also subjected to the CSE approving the issue and listing of such shares and obtaining other governmental or regulatory approvals, HNB said.