Sri Lanka’s SDB receives loan from Belgian Investment Company to support SME lending
SANASA Development Bank PLC (SDB Bank) of Sri Lanka has reportedly secured a US$ 8 million loan from Belgian Investment Company for Development Countries NV/SA (BIO) to increase its capital buffers under Basel III guidelines and support its lending activities for small and medium-scale enterprises (SMEs).
SDB Bank has reportedly noted in a stock market filing that the unlisted, subordinated, five-year term debt with a non-viability conversion, which qualifies as Tier 2 capital, was successfully completed on December 24, 2019.
The fund raising, which entails an interest rate of 6-month LIBOR + 550 basis points per annum, was approved by the bank’s shareholders at an Extraordinary General Meeting held on November 5, 2019, reports state.
The capital repayment of the financing facility will be at maturity, and interest payments will be made on March 1 and September 1 of each calendar year. Also, the term loan would facilitate SDB Bank to raise its Tier 2 capital within the Central Bank-approved Rs.3.2 billion limit.
Reports further state that SDB Bank also intends to enter into a separate arrangement with a licensed commercial bank with a view to hedge the US dollar exposure of the term debt and thereby minimize any currency risks to the bank.
NDB Investment Bank Limited (NDBIB) has functioned as the Financial Advisors and Mangers to the fund raising.
OSL take:
The loan received by Sri Lanka’s SDB from a Belgian investment company is indicative of the strength of the country’s banking sector. The confidence in Sri Lanka’s banking sector has resulted in foreign lending institutions developing the confidence to provide funding to the local institutions. Foreign businesses/investors could therefore confidently explore business opportunities in Sri Lanka due to the backing of a strong banking sector in the island.
| Article Code : | VBS/AT/20200203/Z_8 |