Sri Lanka’s NSB US dollar bond rated ‘BB-‘ by Fitch

Aug 23, 2013 (LBO) – Sri Lanka’s state-run National Savings Bank’s planned dollar denominated bond has been given an expected rating of ‘BB-‘ by Fitch Ratings ahead of an international road show. “Fitch believes that the issue of the notes by NSB is closely linked with government policy requirements,” the rating agency said.

The proceeds are likely to be used to invest in Sri Lanka’s government dollar bond and to fund US dollar and rupee loans to state entities and projects, the agency said.

The deals lead managers, Barclays, Citigroup, HSBC are arranging investor meetings in the US, Europe and Asia Bloomberg newswires reported.

Global bond markets are just ‘opening’ after August holiday season among investment bankers and market jitters on Fed policy, international market sources said.

NSB will be among the first large non-investment grade issuers to go to market after the market open, they said.
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The full Fitch statement is reproduced below:

Fitch Rates National Savings Bank’s Senior Notes ‘BB-(EXP)’

23 Aug 2013 2:46 AM (EDT) Fitch Ratings-Colombo-23 August 2013: Fitch Ratings has assigned Sri Lanka-based National Savings Bank’s (NSB; BB-/Stable) proposed issue of USD-denominated notes an expected rating of ‘BB-(EXP)’.

The final rating is contingent upon receipt of final documents conforming to information already received.

Fitch believes that the issue of the notes by NSB is closely linked with government policy requirements. The proceeds will likely be used to invest in Sri Lanka’s development bonds – USD-denominated debt issued by the government of Sri Lanka – and to fund USD- and LKR-denominated loans to state-owned entities and government-related projects.


The notes are rated at the same level as NSB’s Long-Term Foreign Currency Issuer Default Rating (IDR) of ‘BB-‘ as they constitute unsecured and unsubordinated obligations of the bank.

NSB’s ratings reflect Fitch’s expectation of the government of Sri Lanka’s high propensity but moderate ability to provide support, in case of need, to the bank. The state’s high propensity to support NSB stems from the bank’s full state ownership, systemic importance and its policy mandate of mobilising retail savings and investing them in government securities. The state’s moderate ability to provide timely support to NSB in times of distress is reflected in the sovereign’s ‘BB-‘rating, which is on Stable Outlook.

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Fitch is of the view that state support, in case of need, is likely to be made equally available to depositors, who benefit from an explicit guarantee as contained in the NSB Act, and senior unsecured creditors.

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This is due to NSB’s policy role and to maintain confidence and systemic stability.

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Fitch does not assign a Viability Rating to NSB as the latter is viewed as a public mission bank.


Any change in NSB’s IDRs could impact the rating of the notes. Any change in Sri Lanka’s rating or to the perception of state support to NSB could result in a change in NSB’s IDRs and hence the rating of the notes

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