Pan Asia Bank debenture issue to open on 24th October
View(s):Excerpts from an interview with Dimantha Seneviratne – Director/CEO of Pan Asia Bank
Question: What prompted Pan Asia to issue debentures?
Answer: Pan Asia Bank has seen a significant growth in the balance sheet recently. For the first half of year 2014, our advance growth rate was over 12%. Whilst bulk of this growth would be funded via deposits, there is a need to look in to long term funds to support some of our long term Asset products. Apart from funding the asset growth, we need to strengthen the capital requirement as well, hence the proposed debenture issue would serve two purposes, funding and capital. We also thought that the current interest regime is an opportune time to come up with this debenture issue, to tap the debt capital market.
Q: What types of debentures will the Bank be issuing?
Dimantha Seneviratne - Director/CEO of Pan Asia Bank
A: The Bank intends to issue two types of Debentures. With option one; the investor will receive a yearly interest at 9.75% pa. Option two, would allow the investor to receive the interest every six months at 9.5233% pa (AER 9.75%).The debenture issue opens on 24th October 2014.
Q: What kind of security do the debentures have?
A: Since the Debentures offered by Pan Asia Bank will be subordinated, no further securities will be offered for the Debentures. However the Bank has been recently rated BBB+ by the Lanka Rating & this instrument carries investment grade rating of BBB by Lanka Rating Agency Ltd.
Q: What are the rights that the debentures holder will be entitled to?
A: The Debenture holder will receive interest/ redemption in due time. Additionally, the investors have the right to call and attend meetings of the Debenture Holders as set out in the Trustee Deed. The Debenture holder will also receive a copy of the trust deed on request.
The Debenture holders may additionally approach the Trustee to the issue concerning grievances if any.
Q: What are the benefits that the debentures will offer to the holder?
A: Investing in Debentures will offer the corporate or individual investor with numerous benefits and provide the opportunity to diversify their investment portfolios. The Debentures will also provide the investors with regular cash flows in the form of interest payments.
Since, Debentures will be listed under the Colombo Stock Exchange (CSE) and thus, there will be a secondary market for any investor wishing to exit with an opportunity to do so at the market price prevailing at the time.
The Debentures may also be used as collateral to obtain credit facilities from financial institutions and banks. As per Section 9(0) of the Inland Revenue (Amendment) Act No. 18 of 2013, investments made on debentures after the 1st of January 2013 in corporate debt securities quoted in any stock exchange licensed by the SEC is exempt from income tax, an enormous advantage to potential corporate or individual investors.
Hence, the profits and income earned from our debentures is exempted from income tax.
Q: How long is the tenure period of the debentures?
A: Pan Asia Bank debentures are issued with a maturity of 5 years. (Payable in 2019)
Q: Will there be any intermediaries between the bank and the prospective debenture holder?
A: People’s Bank Investment Banking Unit, Capital Alliance Partners Ltd. and Navara Capital Partners Ltd. will act as Joint Managers to the issue, along with our Bank. Deutsche Bank Colombo will act as the trustee for the Debentures.
Q: How popular are debentures in Sri Lanka?
A: Section 9(0) of the Inland Revenue (Amendment) Act No. 18 of 2013 has been introduced by the government in order to popularise and activate the corporate debt market. While the Debt market is gaining popularity, there is room for more improvement compared to the advanced markets in the region, where secondary intra-trade is taking place on active basis. The exemption from taxes is an attractive feature for potential investors and expected to attract more attention and interest to the Debt Market in Sri Lanka, especially in a low interest regime where investors have other avenues to supplement deposit interest income.
Q: Will you be offering purchasing rights to both local and foreign individuals and what would make them eligible to purchase the issues?
A: Yes, Pan Asia Bank will be offering purchasing rights to both local and foreign clientele. The Bank has indeed witnessed a good response from the foreign clientele with regard to the Debenture investments.
Q: What is the purchase price of a debenture and what will be the minimum amount of debentures a person can subscribe to?
A: Issue price of a Debenture is Rs 100 and an investor is required to invest in a minimum of 100 Debenture ( LKR 10,000/-). An applicant can only apply for one type of Debentures under one application. In the event of an oversubscription, Board of Directors of the bank will decide the basis of allotment.
Q: What sets the debentures from Pan Asia apart from the other debentures offered to the public?
A: The Debentures issued by the Pan Asia Bank is rated investment grade. The Bank is regulated by the Central Bank of Sri Lanka. On the other hand, the Bank is backed by strong shareholders and has a dynamic Board of Directors and a Management Team and there are opportunities for the investor to grow along with the Bank. Recently we have seen an impressive growth in our advances, which is a significant achievement for a medium sized Bank. We have come out from our Gold related issues, the NPL ratios has improved, so we are looking ahead for a significant growth with a cleaner and much stronger balance sheet. With our 78 branches across the country and with SME focused growth planes, investors are expected to benefit from these ambitious but cautious growth plans. Investors may refer to the Prospectus for further details.
Q: What is the process an applicant has to follow to apply for the debentures?
A: Applications can be obtained from all trading members and the members of the CSE, Managers to the issue, Registrars to the issue and all Pan Asia Bank branches. Furthermore, the application form and the Prospectus can be downloaded from the official website of the CSE, www.cse.lk and the website of Pan Asia Bank, www.pabcbank.com.
Application forms once filled should be enclosed in an envelope marked “PAN ASIA BANK- DEBENTURES ISSUE 2014 together with the remittance for the full amount payable on application and dispatched by courier or delivered by hand to Registrars to the issue or collection points mentioned in the prospectus. Applications received after the stated period will be rejected despite carrying a postmark dated prior to the closure date.
The applicant must have a valid CDS account at the time of submission of application and the allotted Debentures will be credited to the applicant’s CDS account. Hence the applicant should be aware that the Bank will not issue a Debenture Certificate.
Applications should reach the office of the Registrar to the issue, Nayantha Fernando, Company Secretary, Pan Asia Bank, No. 450, Galle Road, Colombo 3, at least by 4.30 p.m. on the following market day immediately upon the closure date.
Q: Has Pan Asia issued debentures previously and if so, how has the applicant subscription been?
A: Pan Asia Bank had previously issued 5 year debentures in 2012, worth Rs 750,000,000. The Bank had issued debentures categorised as Type A, B, C and D in March 2012. Due to the market interest rates that were prevalent during that period, the Bank offered interest rates of 11% or similar for those Debentures.
Q: What are some of the unique products that the Bank offers to the customer?
A: The Bank has been operating for nearly two decades and is recognised as a fast growing Bank in Sri Lanka offering a full range of Retail, SME and Business Banking Products and services. We have been a trend setter in broaching innovative banking products to both the local and foreign clientele.
The bank offers numerous unique products amongst which, “Sammana” the product geared towards the retired government sector and Bank employees is of particular importance. Identifying the need for financial facilities targeted specifically towards the senior citizens, Pan Asia Bank offers a facility which allows the retired government officers and bank employees to assign their monthly pension to the Bank and obtain loans up to Rs 500,000 depending on the pension.
The low interest credit card introduced by Pan Asia Bank and the recent Budget Leasing product also have seen a rapid growth in the market. We would continue to introduce such innovative products identifying the need of our customers.
Q: How has the Bank’s progress been in the recent years?
A: The Pan Asia Bank and its customer base have shown a steady growth in recent years. The Bank has established several new branches in the North Eastern areas, over last 2 years. Now is the time to reap the benefits of these investments. We have strengthened our regional management frame work and working on a SME driven retail strategy via these branches to be catalyst in development activities taking place in these regions.
As I mentioned earlier, improvements to our NPLS and a stronger balance sheet would provide the basis for a stronger growth in coming years.
Hence, Pan Asia Bank invites investors from both the corporate sector and individual capacity to invest in the Debentures and reap the benefits via our ambitious growth plans.