Sri Lanka Bank of Ceylon debenture demand strong: officials

Nov 14, 2012 (LBO) – A sale of 5-year debenture of up to 6.0 billion rupees by state-run Bank of Ceylon, due to open on November 15 has seen strong demand and is expected to close quickly, an official said. P A Lionel, deputy general manager treasury and investments of Bank of Ceylon said there had been discussion with foreign banks about investments by their clients, but the bank expected strong local demand for the debentures.

Bank of Ceylon is Sri Lanka’s largest commercial bank based on assets and also has a branch network spread around the country.

The bonds which have been rated ‘AA(lka)’ by Fitch come in fixed and floating rates.

Type A debentures will pay a 16.0 percent fixed rate annually, which works out to 14.4 percent after a 10 percent withholding tax, Lionel said. Equivalent government bonds are yielding 13.0 percent, he said.

Type B debentures pay a floating rate based on the gross 6-month Treasury bill yield plus 1.25 percent.

Type C debentures which carry a fixed rate of 15.25 percent, pay interest every six months.

The budget for 2012 has lifted withholding taxes on new listed debentures issued from January 2013.

Lionel said the bank planned to issue debentures every year, but with interest rates heading lower, securities issued next year are likely to yield less.

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