The Bank of Ceylon is raising Rs. 5 billion with a first-of-its-kind bond issue that is BASEL III compliant, perpetual with a non-viability write down.
The BOC Board recently resolved to issue 30 million BASEL III compliant, unlisted, unsecured, subordinated, perpetual, additional Tier 1 capital bonds worth Rs. 100 each with a non-viability write down. It has an option to issue a further two million of the said bonds in the event of an oversubscription of the initial issue. The issue has been approved by the Securities and Exchange Commission and the Central Bank.
Investors can enjoy a floating rate perpetual with interest rate being 12 months net Treasury bill rate plus 1.50% per annum with a floor rate of 9.50% per annum. Payment is annually.
Minimum subscription for a qualified investor is Rs. 1 million worth of bonds and for individual investor is Rs. 50 million.
The issue opened yesterday and will close on 14 July or earlier on subscription.
The bonds are irredeemable subject to the call option which enables the BOC to call the bonds at its 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 of the Central Bank and other conditions described under Item 5 of the Web Based Return Code 126.96.36.199.1.1 of the Banking Act Direction No. 1 of 2016.
In the event of an occurrence of a trigger event as determined at the sole discretion of the Monetary Board, there would be a full and permanent write down of bonds by the BOC without any requirement of approval by the Bond holders in compliance with BASEL III requirements.
A trigger event has been defined as “the earlier of a point at which the Monetary Board determines (a) that BOC would become non-viable without a write down in terms of item 11 (iii)(a) of the Web Based Return Code 188.8.131.52.1.1 of the Banking Act Direction No 1 of 2016 dated 29 December 2016 or (b) to make a public sector injection of capital equivalent support without which BOC would have become non-viable in terms of item 11 (iii)(b) of the said Direction”.
This bond issue does not have a trustee. However bond certificates are issued to the investors under the common seal of BOC with the signatures of a Director and the General Manager.