Fitch Ratings has revised the expected National Long-Term Rating on HNB Finance Limited’s (HFL, A(lka)/Stable) proposed Sri Lanka rupee-denominated subordinated unsecured debentures to ‘BBB+(EXP)(lka)’ from ‘A-(EXP)(lka)’ following the publication of Exposure Draft: Non-Bank Financial Institutions Rating Criteria and Exposure Draft: Bank Rating Criteria on November 15, under which the debentures are rated.
The proposed debentures total Rs. 2 billion with a maturity of five years and carry fixed coupons. The company plans to use the proceeds to strengthen its Tier II capital base and support loan-book expansion. The proposed debentures are to be listed on the Colombo Stock Exchange.
The final rating is subject to the receipt of final documentation conforming to information already received.
The proposed subordinated debentures are rated two notches below HFL’s National Long-Term Rating in line with the exposure drafts to reflect Fitch’s expectation of poor recoveries arising from the proposed debentures’ subordinated status. Furthermore, we do not expect any regulatory action that would reduce losses on subordinated instruments.