Fitch rates ComBank’s Basel III subordinated debentures ‘BBB+(EXP)(lka)’

Fitch Ratings has assigned Commercial Bank of Ceylon PLC’s proposed Sri Lankan rupee-denominated Basel III-compliant subordinated debentures of up to Rs. 20 billion an expected National Long-Term Rating of ‘BBB+(EXP)(lka)’.The proposed debentures, which will have maturities of five, seven and ten years, will be listed on the Colombo Stock Exchange. 

The bank plans to use the proceeds to further strengthen its Tier 2 capital base, reduce maturity mismatches in the balance sheet and support loan growth.The bank expects the proposed debentures to qualify as Basel III-compliant regulatory Tier 2 capital. The debentures include a non-viability clause whereby they will convert to ordinary voting shares subject to the occurrence of a trigger event, as determined by the Monetary Board of Sri Lanka.

The final rating is subject to the receipt of final documentation conforming to information already received, Fitch said.Fitch rates the proposed Basel III Tier 2 notes two notches below the bank’s National Long-Term Rating of ‘A(lka)’. 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 proposed notes do not incorporate going-concern loss-absorption features.