Fitch rates Bank of Ceylon notes AA(lka)

Fitch Ratings said it assigned an expected national long-term rating of AA(lka) to Bank of Ceylon’s proposed Basel II-compliant subordinated debentures of up to 8 billion in Sri Lanka rupee.

The proposed issuance, which will have tenors of five- and eight-years and carry fixed- and floating-coupons, will be listed on the Colombo Stock Exchange.

The proceeds will be used to strengthen the bank’s tier 2 capital base and reduce asset and liability maturity mismatches, Fitch said.

The bank has a long-term foreign-currency issuer default rating of BB-, long-term local-currency issuer default rating of BB-, short-term foreign-currency issuer default rating of B, viability rating of B+, dollar-denominated senior unsecured notes rating of BB-, national long-term rating of AA+(lka) and an AA(lka) rating on its existing Basel II-compliant Sri Lanka rupee-denominated subordinated debentures.

The proposed subordinated debentures are rated one-notch below the bank’s national long-term rating to reflect subordination to senior unsecured creditors, the agency said.

The issuer rating also is driven by an expectation of extraordinary support from the government of Sri Lanka, stemming from the bank’s high systemic importance, quasi-sovereign status, role as a key lender to government and full state ownership, Fitch said.

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