Fitch Ratings has assigned Nations Trust Bank PLC’s (NTB) proposed Basel III-compliant subordinated unsecured debentures a final National Long-Term Rating of ‘A-(lka)’.
The final rating is the same as the expected rating assigned on March 14, 2019 and follows the receipt of documents conforming to information already received other than the amount of the debentures and the tenure.
The proposed debentures will total up to Rs. 4.5 billion, with maturities of five and seven years, and will be listed on the Colombo Stock Exchange.
They will qualify as Basel III-compliant regulatory Tier 2 capital for the bank and include a non-viability clause whereby they will convert to ordinary shares if so determined by the Monetary Board of Sri Lanka.
The bank plans to use the proceeds to strengthen its Tier 2 capital base and for medium-term funding.Fitch rates the proposed Tier 2 instrument one notch below NTB’s National Long-Term Rating to reflect the notes’ subordinated status and higher loss-severity risks relative to senior unsecured instruments. The notes would convert to equity upon the occurrence of a trigger event, as determined by the Monetary Board of Sri Lanka.
NTB’s National Long-Term Rating is used as the anchor rating for the proposed instrument, as it reflects the bank’s standalone financial strength and best indicates the risk of the bank becoming non-viable.