DFCC Bank raises $ 100 m via five-year bonds at 9.625%

Saturday, 26 October 2013 07:17 -     - {{hitsCtrl.values.hits}}

DFCC Bank said yesterday that it has successfully concluded the raising of US$ 100 million via the issuance of five-year bonds with a coupon rate of 9.625% payable semi-annually. The bonds will be listed on the Singapore Exchange and are rated B by Standard and Poor’s and B+ by Fitch. The original plan was to raise $ 250 million whilst the issue took up two days before being finalised on 24 October. In September, State saving giant NSB raised $ 750 million via a five-year bond at 8.875%, tighter than the initial talk of 9.25%. Nevertheless, dealers at that time said the rate was still “very expensive” compared with other Sri Lankan debt papers. In a filing to the CSE, DFCC said it decided to access the international capital markets and diversify funding sources following the proposal made in the Government’s 2013 Budget. The move was on the back of support to the bank by way of foreign exchange risk cover for long-term funds raised through an international debt issue with the added benefit of interest income from loans given to specific sectors from the proceeds of the notes being tax free. DFCC held road shows in Singapore, Hong Kong and London for many potential investors. The bank said it intends to utilise the funds to retire short-term borrowings, on-lend for infrastructure development and key industry sectors including those identified by the Government. DFCC will also use funds to grow its lending portfolio and for general corporate purposes. “New lending will be to corporate as well as Small and Medium Enterprise (SME) categories. Because of the benefit following from the exchange risk cover support, the bank’s cost of five-year rupees generated through funding swaps compares very favourably with the cost of raising rupees in the domestic market for a similar tenor in current market conditions,” DFCC said. “Although offshore funding options at lower interest rates for shorter tenors are available, this longer tenor liability is more appropriate for the bank’s funding mix considering the nature of the bank’s business, the availability of exchange risk cover and projected use of funds,” the CSE filing added. DFCC also said with this core medium term pool of funds, the bank will be well placed to actively participate in the Government’s development program for the country and profitably expand its asset base.