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

May 22, 2015 (LBO) – Sri Lanka’s Fitch Ratings Lanka has assigned National Development Bank PLC’s proposed subordinated debentures of up to 10 billion rupees, an expected National Long-Term Rating of ‘A+(lka)(EXP)’.

The rating agency also has withdrawn the expected rating of ‘AA-(lka)(EXP)’ assigned to NDB’s proposed senior debentures.

Media release reproduced below: –

The proposed subordinated debentures, which will have a tenor of five years and carry fixed and zero coupons, will be listed on the Colombo Stock Exchange. NDB 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.
Fitch is withdrawing the expected rating assigned to NDB’s proposed senior debentures as its forthcoming senior debt issuance is no longer expected to convert to final ratings.

KEY RATING DRIVERS

The proposed subordinated debentures are rated one notch below NDB’s National Long-Term Rating to reflect the subordination to senior unsecured creditors.

The issuer rating is driven by the bank’s intrinsic financial strength. NDB’s rating captures its long and stable operating history and its developing franchise as a commercial bank.

RATING SENSITIVITIES

The rating on the proposed debentures will move in tandem with NDB’s National Long-Term Ratings.
Fitch believes that NDB’s capitalisation and its rating would come under pressure if the bank sustains its growth momentum, in the absence of other mitigating factors.

The consolidation of NDB’s franchise alongside its ability to sustain strong credit metrics could result in an upgrade of NDB’s ratings.

A full list of NDB’s ratings follows:

Long-Term Foreign-Currency Issuer Default Rating (IDR): ‘B+’; Outlook Stable

Short-Term Foreign-Currency IDR: ‘B’

Long-Term Local-Currency IDR: ‘B+’; Outlook Stable

Viability Rating: ‘b+’

Support Rating : ‘4’

Support Rating Floor: ‘B’

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

Outstanding subordinated debentures: ‘A+(lka)’

Proposed subordinated debentures: ‘A+(lka)(EXP)’