The first debt issue was launched to list the bank in 2011 in accordance with regulations set by the Central Bank of Sri Lanka (CBSL). The most recent debt issue was an immense success and will play a crucial role in supporting the bank’s continued growth and progress. DFCC Bank PLC has majority ownership of DVB and owns 99.17% of the bank.
The bank is known for its commitment to developing innovative products and services and introduced another industry first with its latest debt issue. It was the first listed debt issue consisting of two types of debt rankings, viz senior and subordinated. Investors were given a choice of selecting between the rankings as opposed to interest rate types, drawing attention to the stability of the organization. The senior debt carried a National Long term Rating of AA- while the subordinated debt carried a National Long term Rating of A+. Both ratings were affirmed by Fitch Ratings. The issue was extremely successful and was oversubscribed in both categories, within hours of the issue opening to the public.
Both instruments carried a tenor of 5 years with a bullet capital repayment and annual interest payments of 9.10% and 9.40% for senior and subordinated debt respectively. The investments offered attractive rates of interest to both types of investors based on their selection of the rank of debt. The debentures were quoted on the Colombo Stock Exchange (CSE), therefore investors could buy and sell the debentures in the secondary market. The debenture holders will carry the investments in their Central Depository System (CDS) accounts after the allotment process to ensure the convenience of transactions.
The debentures will assist the improvement of any asset and liability mismatches in the bank. In addition the subordinated debt component will boost the tier II capital ratio of the bank in accordance with Basel II guidelines. The bank’s capital adequacy ratios as at December 31 2014 stand at comfortable levels of 13.08 for total capital and 12.24 for tier 1 respectively. DVB is poised to grow its asset base and the debenture issue will support the growth process without the bank incurring the stress of any additional capital requirements. DVB is one of the best capitalized banks in the mid sized banking category. In terms of interest rate risk, the fixed rate will assist in mitigating any interest rate risk which arises due to market interest rate changes.
DVB’s debt issue was managed by Capital Alliance Partners Limited and Acuity Partners (Pvt). Limited. The structuring partner for the issue was DFCC Bank’s Funding and Capital Markets Division.
