Fitch Ratings has assigned the proposed Basel III-compliant subordinated unsecured debentures of Sri Lanka’s National Development
Bank PLC (NDB, A+(lka)/Stable) a final National Long-Term Rating of ‘A-(lka)’.The final rating is the same as the expected rating assigned on 6 September 2021, and follows the receipt of documents conforming to information already received. The proposed debentures will total up to Rs 8 billion with maturities of five and seven years, and will be listed on the Colombo Stock Exchange. NDB plans to use the proceeds to strengthen its Tier 2 capital base and support loan-book expansion.
The proposed debentures include a non-viability clause whereby they will convert to ordinary voting shares if so determined by the Monetary Board of Sri Lanka. NDB’s proposed and outstanding Sri Lankan rupee-denominated subordinated debt is rated two notches below the National Long-Term Rating anchor. This reflects Fitch’s baseline notching for loss severity for this type of debt, and our expectations of poor recoveries.
There is no additional notching for non-performance risks, as the debentures do not incorporate going-concern loss-absorption features. NDB’s National Long-Term Rating is used as the anchor rating for this instrument because the rating reflects the bank’s standalone financial strength, and best indicates the risk of the bank becoming non-viable. NDB’s National Long-Term Rating was affirmed on August 3, 2021, and is driven by its intrinsic credit profile.
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