DFCC to raise Rs. 5 b via private debt

DFCC Bank is to raise Rs. 5 billion via a privately placed debenture issue.

The Bank said it will issue 50 million senior, unlisted, rated, unsecured, redeemable debenture of Rs. 100 each via a private placement. The tenor is up to five years and will carry fixed coupons. 

The bank plans to use the proceeds to support its loan expansion.

The Securities and Exchange Commission has approved the issue. Fitch Ratings has assigned a final National Long-Term Rating of ‘AA-(lka)’ for the upcoming debenture issue.  In January, the DFCC Board of Directors resolved to issue 70 million BASEL III compliant, subordinated, listed, rated, unsecure, redeemable debentures with a Non-Viability conversion option, each at Rs. 100 with a term of up to 7 years. However this move was abandoned given the outbreak of COVID-19 and resultant developments.  

DFCC Bank in 2019 Annual Report said it has consistently maintained a capital ratio above the Basel III minimum capital requirements. As at 31 December 2019, the Group’s Tier 1 capital adequacy ratio stood at 11.33% while the total capital adequacy ratio was 15.78%. On a solo basis, as at 31 December 2019, DFCC Bank recorded Tier 1 and total capital adequacy ratios of 11.34% and 15.81% respectively. These ratios are well above the minimum regulatory requirements of 8.5% and 12.5% effective in January 2020. The Bank’s total asset base as at 31 December 2019 grew by 8% to Rs. 404,897 million from Rs. 374,907 million as at 31 December 2018. This constitutes a loan portfolio growth of Rs. 23,085 million to Rs. 272,818 million compared to Rs. 249,734 million as at 31 December 2018 recording an increase of 9%. The term loans recorded the highest growth of Rs. 21,139 million out of the total growth in loans to and receivables from other customers, followed by lease receivable with a growth of Rs. 3,861 million. 

Based on the medium term projected growth plan, DFCC has projected an asset base of over Rs. 500 billion and above to be achieved by year 2021, with the intention of becoming a systematically important domestic Bank. This will result in the need to maintain an increased Tier 1 ratio of 10% by 2021.