Rs. 10 b debenture issue of COMBank up for subscription

The Rs. 10 billion listed debenture issue of Commercial Bank is now open for subscription. 

The bank is issuing 50 million Basel III compliant Tier 2, listed, rated, unsecured, subordinated, redeemable debentures with a non-viability conversion feature at Rs. 100 each with an option to offer a further 50 million debentures in the event of an oversubscription.

The debentures are of two types – Type A, a five-year instrument with a fixed coupon rate of 9% per annum (Annual Effective Rate of 9.2%) payable semi-annually and Type B, a six-year instrument with fixed coupon rate of 9.50% per annum (AER of 9.73%) payable semi-annually. 

The official opening date is 13 September but can be subscribed now on. 

Managers to the issue is Commercial Bank’s Investment Banking Unit.

The entire quantum of funds raised through the debenture issue will be utilised to finance expansion by increasing the lending portfolio of the bank within six months from the date of allotment. 

The bank will obtain Board Investment Committee approval to invest the debenture issue funds in Treasury bills and/or Treasury bonds until utilised for the stated objective. Such investments in Government securities are expected to generate a return of approximately 5% p.a. at current rates.

Subordinated funds raised through the debenture issue in compliance with requirements under Basel III, are expected to further improve the capital adequacy ratio of the bank by increasing its Tier 2 capital base.

The debenture issue will also reduce maturity gaps in the bank’s balance sheet by matching medium to long-term liabilities with medium to long-term assets as and when the proceeds from the debentures are utilised as per the stated objective.