PLC to issue Rs.3bn debenture for re-lending

Sri Lanka’s largest licensed finance company based on assets, People’s Leasing & Finance PLC (PLC), is to issue a Rs.3 billion debenture to support its lending activities.

This is the second such debenture issue by PLC within 18 months as the company in March 2013 issued a debenture to raise Rs.6 billion.

The forthcoming Rs.3 billion debenture will carry a tenure between three and four years with fixed interest rates. Fitch Ratings last week issued ‘AA-‘for the issue in line with PLC’s national longterm rating.

According to market sources, the debenture issue is likely to hit the market either in September or October. However, the company may have to take cognizance of the incoming debenture issues by many banks and finance companies announced recently as they could soak up the liquidity in the market.

The increasing number of firms, particularly the financial sector companies, is coming out with debenture issues mainly due to attractive interest rates being offered in the prevailing low interest rate environment, to strengthen the capitalization levels, which were weakened due to asset growth.

It was only last week Bank of Ceylon announced its second Rs.8 billion debenture within 12 months to be issued in mid-September, offering interest rates around 8 percent, significantly below 12.60 to 13.75 percent the bank offered last October.

Pan Asia Banking Corporation PLC is expected to come up with a Rs.3 billion debenture as the bank’s Tier II capitalization levels are increasingly coming under pressure.

Meanwhile, Lanka Orix Leasing Company PLC (LOLC) is coming up with a Rs.7 billion debenture, which will again hit the market during the fourth week of this month.

Being the third largest licensed finance company, LOLC is offering rates in the range of 11.00 percent for its five-year debenture but it is anybody’s guess if the rate sets a wrong benchmark, the proposed PLC debenture could be negatively impacted.

Currently, PLC’s balance sheet shows Rs.1.57 billion worth of unlisted debentures and 6.0 billion of listed debentures. In January the company secured 2½-year US $ 50 million loan syndication from Emirates MND Bank, which saw PLC settling the US $ 10 million facility obtained from the same party and the rest was utilized to manage t he asset-liability mismatches and for business expansion.

(DK)