Bank of Ceylon (BOC), the premier state-owned diversified financial services organization in Sri Lanka incorporated in 1939 and known island-wide as ‘Bankers to the Nation’ will launch a rare product and hence a not to be missed investment opportunity - a LKR denominated debenture to be listed on the Main Board of the Colombo Stock Exchange (CSE). The debenture issue, valued between Rs.3 billion - Rs. 5 billion, managed by the Merchant Bank of Sri Lanka, a majority-owned listed subsidiary of BOC; signals the entry of the financial giant into the public domain via its CSE listing. This debut public issue by BOC; no less historic than the $500Mln Bond issued in 2007 by the Government of Sri Lanka, is open to all adult citizens of Sri Lanka and is attractively structured via 3 interest rate options thereby appealing to all potential investors. Among its other characteristics, the debenture will be redeemable at the end of 5 years but due to its CSE listing and financial strength of BOC, sale anytime prior to maturity in 2013 is possible.

The issue of the debentures has several purposes. Primarily it is to enhance the capital structure thereby addressing the declining Capital Adequacy Ratio and providing much needed capacity to undertake incremental business. Each Rs. 1 billion of capital infusion is likely to underpin some Rs. 10 billion of incremental loans and advances. Given its features i.e. unsecured, subordinated & 5-year tenor, the debentures count as Tier II Capital thereby enhancing not only its Capital Adequacy Ratio but also the Single Borrower Limit. The second purpose is to convert and capitalize the BOC branch in London as a subsidiary operating under the direct supervision of the Financial Services Authority in the UK. The decision to go public with this debenture issue is to initiate, encourage and widen not only the investment habit among the general public in Sri Lanka but also to educate them in terms of risk and return. Investments via debt instruments of this scale carrying a variety of interest rate options are relatively low.