Fitch Ratings has assigned an expected National Long-Term Rating of ‘BBB+(EXP)(lka)’ to proposed subordinated listed debentures of up to Rs. 1 billion from Merchant Bank of Sri Lanka & Finance PLC (MBSL), the rating agency said on Tuesday.
The rupee-denominated debentures will mature in five years and will be listed on the Colombo Stock Exchange. MBSL plans to use the proceeds to meet regulatory capital adequacy requirements, according to Fitch.
The rating sits two notches below MBSL’s own National Long-Term Rating of ‘A(lka)’ with a stable outlook. Fitch said this reflects its standard approach to subordinated debt, which it expects to recover poorly if a default occurs.
Fitch said MBSL’s rating rests on its expectation of extraordinary support from its parent, Bank of Ceylon, which holds 84.4 percent of the company.
The final rating depends on Fitch receiving final documentation that matches the information it has already seen. For investors, the rating is one guide to the credit risk of the issue.
