Union Bank to raise Rs. 3 b in debentures

Union Bank of Colombo PLC on Friday announced its proposed Debenture Issue 2026, a strategic move aimed at raising up to Rs. 3 billion.

This issue is designed to boost the bank’s Tier II capital base and provide a robust financial foundation for its upcoming growth initiatives, the bank said in a media release.

The offering consists of Basel III compliant, listed, rated, unsecured, subordinated, redeemable high-yield debentures with Non-Viability Conversion. The instrument has been assigned a rating of BB (lka) by Fitch Ratings (Lanka) Ltd, reflecting the bank's creditworthiness and the structured nature of the subordinated debt. 

Investors can choose from three distinct interest structures starting from a high-yield 13 per cent fixed rate per annum (Type A). This option is paid annually, while Type B offers a 12.5 per cent fixed rate paid semi-annually (12.89 per cent AER). For those seeking market-linked returns, Type C provides a floating rate of the 182-days Treasury Bill rate plus a 400-basis point margin, also paid semi-annually.

The debentures are priced at Rs. 100 per unit with a 5-year tenure (2026–2031). The initial issue size is set at 20,000,000 debentures with an option to raise 10,000,000 at the discretion of the bank and is scheduled to open on March 10, 2026.

Shanka Abeywardene, Chief Financial Officer of Union Bank stated: “This debenture issue marks a significant step in the bank's journey towards enhanced financial stability. By strengthening its capital adequacy, Union Bank is well-positioned to navigate evolving market conditions while fuelling its long-term strategic objectives for sustainable growth.”