Fitch rates MBSL’s proposed subordinated debt ‘BBB+(EXP)

Wednesday, 7 October 2026 04:51 - - {{hitsCtrl.values.hits}}

Fitch Ratings has assigned Merchant Bank of Sri Lanka & Finance PLC’s (MBSL, A(lka)/Stable) proposed Sri Lankan rupee-denominated subordinated listed debentures of up to Rs. 1 billion, an expected National Long-Term Rating of ‘BBB+(EXP)(lka)’.

The proposed debentures will mature in five years and will be listed on the Colombo Stock Exchange. The company plans to use the proceeds to comply with regulatory capital adequacy requirements.

The final rating is subject to the receipt of final documentation conforming to information already received.

The proposed debentures are rated two notches below MBSL’s National Long-Term Rating. This reflects our baseline notching for loss severity for this debt class and our expectation of poor recoveries in the event of default.

Fitch has applied Bank Rating Criteria to rate the proposed debentures, as Fitch believes the prudential capital framework of Sri Lankan finance companies is closer to that of banks. There is no additional notching for non-performance risk, as the proposed debentures do not contain going-concern loss-absorption features.

MBSL’s National Long-Term Rating is driven by Fitch’s expectation of extraordinary shareholder support from its parent, Bank of Ceylon (BOC, AA-(lka)/Stable). This view is based on BOC group’s 84.4% stake, history of equity support, control over MBSL’s policies and strategies through board representation, and links with MBSL.