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Hatton National Bank’s Rs. 7 billion debenture issue, which was oversubscribed, had drawn over 600 applications.
The bank issued 40 million subordinated unsecured redeemable rated debentures of Rs. 100 each with an option to issue a further 20 million and 10 million debentures in the event of oversubscription of the preceding amounts.
The entire issue was snapped up with Rs. 7.4 billion worth of demand from 617 applicants. The majority 611 had been applications by payment by cheques and RTGs requesting for 6.27 billion debentures and the balance Rs. 1.12 billion from six applicants with payments via bank guarantees.
This is in contrast to DFCC Bank’s Rs. 7 billion debenture issue (rated, senior unsecured, redeemable) which drew only 65 applicants. DFCC also decided to stop the issue at Rs. 5 billion being the original amount of its debenture issue without exercising the option to raise the balance Rs. 2 billion.
HNB offered 11.25% per annum for its five-year debenture whilst DFCC’s three-year debenture offered 10.625% per annum.
Funds raised through HNB’s debenture Issue will be utilised to further increase the Tier II capital of the bank and to further strengthen the lending portfolio through loan disbursements. The bank intends to utilise the entire proceeds of the issue to expand its loan book in the ordinary course of business before end of financial year 31 December 2016. Furthermore, the subordinated nature and long-term tenor of the Debentures being issued will enable the bank to:
a) Increase its Tier II capital base in order to further enhance the Capital Adequacy Ratio
b) Minimise mismatch of durations between assets and liabilities of the bank’s balance sheet
c) Strengthen the bank’s liquidity position and increase its asset base.
For DFCC, funds raised through the debenture offering will supplement the ongoing deposit mobilisation drive of the bank to support the lending and investment activities of DFCC as part of its normal course of business for the year ending 31.12.2016.
DFCC will use these mobilised funds to support lending in the SME sector, personal financial services and project financing. Medium-term Debentures Issue will enable DFCC to better manage its asset and liability maturity mismatches and interest rate sensitivity gaps.
