BOC to raise Rs. 10 b via Basel III compliant perpetual bonds

State-owned giant Bank of Ceylon is to raise Rs. 10 billion via the issuance of BASEL III compliant, rated, unlisted, unsecured, subordinated, perpetual, additional Tier 1 capital bonds with a non-viability full and permanent write-down.

It will issue 30 million such bonds initially with an option to offer a further 70 million such bonds in the event of an oversubscription of the original amount. The bonds will have a floating rate of Weighted Average 12 months Net Treasury Bill rate + 1.50% per annum, with a floor rate of 9% paid annually. The bonds are rated SL AA with negative outlook by ICRA Lanka Ltd.

Minimum subscription for a qualified investor is Rs. 1 million and by individual investor is Rs. 50 million.

The issue date is 1 December, and closes on 31 December or earlier.  

The bonds are irredeemable, subject to the ‘call option’, which will be at the bank’s discretion at any time after the expiry of five years from the date of issue. This is subject to the approval of the Monetary Board and other conditions.

BOC said the write-down mechanism is in case of an occurrence of a ‘trigger event’, as determined at the sole discretion of the Monetary Board, where there would be a full and permanent write down of bonds by the bank without any requirement of approval by the bond holders in compliance with Basel III requirements. 

‘Trigger event’ means the earlier of a point at which the Monetary Board determines a) the bank would become non-viable without a write-down or b) to make a public sector injection of capital or equivalent support without which the bank would have become non-viable.

In July, via a similar instrument, BOC raised Rs. 5 billion. The rate offered was 12 months Net Treasury Bill rate + 1.50% per annum, with a floor rate of 9.50%.