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Fitch rates planned Sampath Bank Rs7.0bn rupee debt sale ‘A+(lka)(EXP)’

Nov 11, 2014 (EconomyNext) – Sri Lanka’s Sampath Bank is planning a 7.0 billion rupee debt sale which has been given a expected rating of ‘A+’ (lka) in the domestic investment grade, Fitch Ratings said.

"Sampath expects to use the proceeds to strengthen its Tier 2 capital base and reduce asset and liability maturity mismatches," the rating agency said.

The 5-year listed debt will pay a fixed rate.

The full statement is given below:

Fitch Rates Sampath Bank’s Subordinated Debentures ‘A+(lka)(EXP)’

Fitch Ratings-Colombo/Hong Kong-11 November 2014: Fitch Ratings Lanka has assigned Sampath Bank PLC’s (Sampath; AA-(lka)/Stable) proposed subordinated debentures of up to LKR7bn an expected National Long-Term Rating of ‘A+(lka)(EXP)’.

The debentures, which will have tenors of five years and carry fixed coupons, will be listed on the Colombo Stock Exchange. Sampath expects to use the proceeds to strengthen its Tier 2 capital base and reduce asset and liability maturity mismatches.

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

KEY RATING DRIVERS

The proposed debentures are rated one notch below Sampath’s National Long-Term Rating to reflect their subordination to senior unsecured debt.

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Sampath Bank’s rating is driven by its modest and expanding franchise, and relatively higher risk appetite as seen in its aggressive loan growth and high gold-backed lending until end-2013, which has put pressure on its asset quality. Fitch believes asset quality indicators could be weaker than those reported should a broader definition of impairment be applied. This could put pressure on its rating given the bank’s lower capitalisation relative to peers.

RATING SENSITIVITIES

The rating on the proposed debentures will move in tandem with Sampath’s National Long-Term Ratings.

A full list of Sampath’s ratings follows:

National Long-Term Rating: ‘AA-(lka)’; Stable Outlook

Outstanding Sri Lanka rupee-denominated subordinated debentures: ‘A+(lka)’

Proposed Sri Lanka rupee-denominated subordinated debentures: ‘A+(lka)(EXP)’
 

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