The Colombo Stock Exchange (CSE) on Thursday (08) said it had approved in principle Hatton National Bank’s (HNB) Rs. 3 billion debenture issue.
The issue of 20 million unsecured, senior, redeemable debentures opens on August 23, 2013, with the option of issuing a further 10 million in the event of oversubscription.
The debentures are valued at Rs. 100 each with a discounted issue price of Rs. 67.715.
Capital Alliance Partners Ltd is managing the issue with SSP Corporate Services Pvt. Ltd functioning as registrars.
Earlier, Fitch said it would rate the debt at ‘AA-’ with the bank expected to use the proceeds to fund its lending activities.
"HNB’s ratings reflect its strong domestic franchise in lending and deposit mobilisation as the fourth-largest bank in Sri Lanka, as well as its satisfactory capitalisation and operating performance. However, HNB exhibits weaker asset quality than higher-rated peers, as reflected in higher and more volatile non-performing loan (NPL) ratios and lower provisions coverage, which constrain its ratings," Fitch said last June.
"A notable increase in HNB’s risk appetite, or a weakening of underwriting standards, which results in more volatile financial performance and asset quality could lead to a downgrade. In particular, a weakening of asset quality accompanied by a faster-than-expected drop in both capitalisation and provisions for non-performing loans could also lead to downward rating pressure.
"HNB has higher business risk than higher-rated peers, stemming from its higher exposure to retail and SME loans. Consequently the bank’s asset quality swings have been more pronounced. This, combined with weak economic conditions at present, leads Fitch to believe that potential for a rating upgrade is limited in the medium-term," Fitch said.