Fitch rates DFCC Bank’s Basel III Subordinated Debt ‘BBB(EXP)(lka)’

Fitch Ratings has assigned DFCC Bank PLC’s (A-(lka)/Stable) proposed Basel III-compliant subordinated unsecured debentures of up to LKR8 billion an expected National Long-Term Rating of ‘BBB(EXP)(lka)’.

The proposed debentures will mature in five and seven years and will be listed on the Colombo Stock Exchange. The bank plans to use the proceeds to strengthen its Tier 2 capital base and to support its loan book expansion. The bank expects the proposed debentures to qualify as Basel III-compliant regulatory Tier 2 capital. The debentures include a non-viability clause whereby they will convert to ordinary voting shares subject to the occurrence of a trigger event, as determined by the Monetary Board of Sri Lanka. The final rating is subject to the receipt of final documentation conforming to information already received.

DFCC’s Sri Lankan rupee-denominated subordinated debt is rated two notches below the bank’s National Long-Term Rating anchor. This reflects Fitch’s baseline notching for loss severity for this type of debt and our expectations of poor recoveries. There is no additional notching for non-performance risks as the notes do not incorporate going-concern loss-absorption features.

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