NTB’s Rs. 3.5 b BASEL III-compliant debenture issue opens

Monday, 9 April 2018 00:00 -     - {{hitsCtrl.values.hits}}

Nations Trust Bank Plc will aim to raise Rs. 3.5 billion via BASEL III-compliant debentures. 

The issue’s official opening is 11 April whilst it was available for subscription from 6 April.  

The bank is issuing 35 million BASEL III-compliant, Tier II, listed, rated, unsecured, subordinated redeemable five-year debentures with a non-viability conversation at Rs. 100 each. The allotment and secondary trading of these debt securities is limited to qualified investors.

Type A debenture offers 12.65% per annum (AER of 13.05%) payable semi-annually and the Type B debenture offers 13% per annum (AER 13.00%) payable annually. 

Fitch has assigned the debentures a rating of “A-”.

Funds raised through the Debenture Issue are expected to further improve the Capital Adequacy of the bank’s balance sheet in addition to improving the risk profile of the bank, enabling favourable funding options.

The subordinated nature and medium- to long-term duration of the Debentures issued in compliance with the requirements under BASEL III will enable the bank to strengthen the Tier II Capital Base as per BASEL III requirements. Approval has been obtained from the Central Bank of Sri Lanka to include the Debentures (BASEL III compliant) under Tier II Capital.

The Debenture will provide the necessary medium-term stable funding to expand the lending portfolio of the bank. Given that our portfolio consists of a sizable medium-term loan portfolio in addition to the standard short-term loans, raising five-year funds will further improve the bank’s funding profile by reducing the tenor mismatch between the shorter term liabilities and the medium-term assets. This will reduce the interest rate and liquidity risk exposure of the bank by reducing the funding gaps. 

The bank intends to utilise the entire proceeds of the Issue to expand the bank’s loan book via diverse lending products in the ordinary course of business over a period of three to 12 months based on the current credit demand.

The bank will utilise the proceeds generated through the Debenture to fund both the existing and future growth of medium-term assets in the following manner: a) SME Loans - Rs. 2 billion and b) Corporate Banking Facilities - Rs. 1.5 billion.

The managers to the issue are NTB Treasury and Investment Banking Division.