Fitch assigns Seylan Bank’s Basel III Sub Debt a BBB+(lka) final rating

Fitch Ratings has assigned Seylan Bank PLC’s (A(lka)/Stable) proposed Basel III-compliant subordinated unsecured debentures a National Long-Term Rating of ‘BBB+(lka)’.

The final rating is the same as the expected rating assigned on 21 August 2020, and follows the receipt of documents conforming to information already received.

The bank expects the proposed subordinated debentures to qualify as Basel III-compliant regulatory Tier 2 capital. 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. The bank plans to use the proceeds to fund loan growth and strengthen its funding and Tier 2 capital bases. The debentures are to be listed on the Colombo Stock Exchange.

KEY RATING DRIVERS

Seylan’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.

Fitch affirmed Seylan’s National Long-Term Rating at ‘A(lka)’/Stable on 5 August 2020.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to positive rating action/upgrade:

– Seylan’s subordinated debt would be upgraded if the bank’s National Long-Term Rating is upgraded.

Factors that could, individually or collectively, lead to negative rating action/downgrade:

– Seylan’s subordinated debt would be downgraded if the bank’s National Long-Term Rating is downgraded.

DATE OF RELEVANT COMMITTEE

04 August 2020

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.