Friday, 29 March 2024
Seylan Bank goes for Rs.8 bilion senior debenture issue

Seylan Bank goes for Rs.8 bilion senior debenture issue

Seylan Bank PLC expects state support due to its state holding - which came about in the aftermath of the bank's crisis in December 2008 - and a higher share of banking-sector deposits relative to some peers, Fitch Ratings, International ratings agency predicted.

Seylan Bank is to make a senior debenture issue of Rs. 8 billion to further strengthen its financial stability. The debentures will have tenors of three and four years and carry fixed and floating coupons.

The debentures are to be listed on the Colombo Stock Exchange, and the bank plans to use the proceeds to fund loan growth, strengthen its funding mix, reduce structural maturity mismatches, and reduce its short-term borrowings.

In December 2008 ,Ceylinco group divested its interest Seylan Bank in where two state institutions (Sri Lanka Insurance Corporation and Bank of Ceylon) bought 25% of the bank becoming the largest shareholder as at 31st December 2009.

Following the take over, Central Bank handed over the management of Seylan to Bank of Ceylon and was asked to appoint a new board. It has also protected the entire financial services sector from further crisis.

Fitch Ratings has assigned Seylan Bank PLC's (A-(lka)/Stable) proposed senior debenture issue of up to LKR8bn a National Long-Term Rating of 'A-(lka)(EXP)'.

Seylan Bank's senior debt is rated at the same level as its National Long-Term Rating, as the debentures rank equally with other senior unsecured obligations.

The National Long-Term Rating of Seylan Bank reflects Fitch's expectation of state support due to its state shareholding - which came about in the aftermath of the bank's crisis in December 2008 - and a higher share of banking-sector deposits relative to some peers.

Seylan Bank has a lower support-driven rating than its larger peers, due to its smaller market share. Fitch believes Seylan Bank's standalone financial strength has improved, reaching the same level as it support-driven rating.

Seylan Bank's senior debt ratings will move in tandem with its National Long-Term Rating, Fitch said.

A downgrade of Seylan Bank's rating could result from a reassessment of state support and a substantial reversal in recent improvements to its asset quality, together with a weakening financial profile.

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