Fitch Ratings has assigned Sampath Bank PLC’s (A+(lka)/Negative) proposed Basel III compliant subordinated debentures a National Long-Term Rating of ‘A(lka)’.
The notes will total Rs 7.5 billion, mature in five years and carry fixed coupons. The notes include a non-viability clause and will qualify as regulatory Tier II capital for the bank. The bank plans to use the proceeds to strengthen its Tier II capital base and support its loan book expansion.
The final rating is the same as the expected rating assigned on 11 January 2018, and follows the receipt of documents conforming to information already received.
Fitch rates the proposed Tier II instrument one notch below the bank’s National Long-Term Rating of ‘A+(lka)’ to reflect the notes’ subordinated status and higher loss-severity risks relative to senior unsecured instruments. The notes would convert to equity upon the occurrence of a trigger event, as determined by the Monetary Board of Sri Lanka.
Sampath’s National Long-Term Rating is used as the anchor rating because the rating reflects the bank’s standalone financial strength. Fitch believes that the bank’s standalone credit profile best indicates the risk of becoming non-viable.
Fitch has not applied additional notching to the notes for non-performance risk, as they have no going-concern loss-absorption features, in line with Fitch’s criteria.
Sampath’s National Long-Term Rating was affirmed on December 21,2017, factoring in Fitch’s expectation that the bank is in the process of shoring up capitalisation to meet the tighter requirements of 10.0% Tier 1 and 14.0% total capital ratios by 1 January 2019.
In December 2017, Sampath raised Rs 7.6 billion and Rs 6 billion via a rights issue and Basel III compliant subordinated debenture issuance, respectively.
0 comments: