The Colombo Stock Exchange has approved in principle Sampath Bank’s plan to raise up to Rs. 10 billion through Basel III-compliant debentures, with the subscription list opening on 20 October, the Daily FT reported.
The bank will initially offer 70 million listed, rated, unsecured, subordinated, redeemable debentures at a par value of Rs. 100 each — Rs. 7 billion — and may issue a further 30 million at its discretion if that is oversubscribed, taking the total to the Rs. 10 billion maximum, EconomyNext reported. All of it carries a non-viability conversion feature, meaning the paper can be written down or converted to equity if the regulator judges the bank non-viable.
The issue comes in two types. Type A runs five years to 2031 at a fixed 12.8% a year; Type B runs seven years to 2033 at a fixed 13%. Interest on both is payable annually, with annual effective rates matching the stated coupons. The bank’s Investor Relations Department is manager to the issue, Capital Alliance Partners is placement agent and Central Depository Systems is registrar. Soft copies of the prospectus reached trading participants on Thursday.
This is a first tranche, not the whole programme
Neither filing says so, but the Rs. 10 billion is the opening instalment of something considerably larger. This newsroom reported on 2 October that Sampath was seeking shareholder approval to raise up to Rs. 50 billion through Basel III Tier 2 debentures, green bonds or sustainability bonds — up to 500 million instruments at Rs. 100 each, carrying the same non-viability feature, to be raised in one or more tranches within three years of approval. On those terms this issue uses a fifth of the authorisation at most.
The pricing undercuts smaller issuers
Two comparable issues from the last few weeks are in this newsroom’s record, and Sampath has priced inside both.
- Pan Asia Bank, September: three-year at 12.75%, five-year at 13.50% — 70 basis points above Sampath’s five-year.
- Aitken Spence Hotel Holdings, listed 2 October: five-year at 13.00% annual, seven-year at 13.15% — 20 and 15 basis points above Sampath’s two tenors.
The Aitken Spence comparison is the sharper one, because it runs against the grain of how the instruments rank. That paper is senior unsecured corporate debt; Sampath’s is subordinated bank capital that converts at the point of non-viability, which ordinarily prices above senior debt of the same tenor, not below it. Sampath is pricing through it on credit standing — Fitch rated this issue A(lka), as EconomyNext noted in its earlier report.
Sampath’s term premium is also thin: 20 basis points buys the investor two extra years between the five- and seven-year tenors, against the 75 points Pan Asia paid to extend from three years to five.
Not reported
Neither filing gives the issue’s opening or closing size conditions beyond the oversubscription option, the intended use of proceeds, or whether the Rs. 50 billion shareholder authorisation reported on 2 October has since been granted. Neither states the date of the CSE’s approval, and neither mentions that this is a tranche of a larger programme.
The appetite question is open but not unsupported: Pan Asia’s issue closed oversubscribed on its opening day and People’s Leasing’s was oversubscribed in September. The two rate comparisons above are drawn from this newsroom’s own archive, not from either filing; the issues priced weeks apart and in different parts of the market, so they indicate the pricing environment rather than a like-for-like spread.
Sources: EconomyNext, Daily FT.
