NATIONAL DEVELOPMENT BANK PLC
PROSPECTUS
AN ISSUE OF UPTO FIFTY MILLION (50,000,000) BASEL III COMPLIANT-TIER 2, LISTED RATED UNSECURED SUBORDINATED REDEEMABLE DEBENTURES WITH A NON-VIABILITY CONVERSION ("DEBENTURES"), AT THE PAR VALUE OF SRI LANKA RUPEES ONE HUNDRED (LKR 100/-) EACH TO RAISE
SRI LANKA RUPEES FIVE BILLION (LKR 5,000,000,000/-)
MAXIMUM ISSUE WILL NOT EXCEED FIFTY MILLION (50,000,000) OF
SAID DEBENTURES OF A VALUE OF NOT EXCEEDING SRI LANKA RUPEES FIVE BILLION
(LKR 5,000,000,000/-)
TO BE LISTED ON THE
COLOMBO STOCK EXCHANGE
Rated BBB (lka) by Fitch Ratings Lanka Limited
(Please note that this is the minimum rating that is allowed by the CSE for listing debentures.
Furthermore, should the rating go below the regulatory requirement of the CSE at a point of time prior to listing, the debenture will not be listed. Should the rating go down post listing, the instrument will be subject to enforcement actions as set out in the listing rules)
ISSUE OPENS ON
26th NOVEMBER 2024
ISSUE IS LIMITED TO "QUALIFIED INVESTORS" ONLY AS DEFINED HEREIN
Managers and Placement Agents to the Issue
National Development Bank PLC - Debenture Issue 2024 | i
The delivery of this Prospectus shall not under any circumstance constitute a representation or create any implication or suggestion that there has been no material change in the affairs of the Bank since the date of this Prospectus. If any material change in the affairs of the Bank occurs subsequent to the Prospectus date and before the Issue opening, same will be notified by way of a market disclosure/an addendum.
By acquiring any Debenture, each Debenture Holder irrevocably consents to the Principal Amount of the Debenture and any accrued and unpaid interest thereon being deemed paid in full by the issuance of ordinary voting shares upon occurrence of a Trigger Event and the resulting Non-Viability Conversion required to be effected by the Bank.
Upon a Non-Viability Conversion;
- The Trustees shall not be required to take any further directions from holders/beneficial owners of the Debentures under the Trust Deed and
- The Trust Deed shall impose no duties upon the Trustees whatsoever with respect to conversion of the Debentures into ordinary voting shares upon a Trigger Event
- Upon the occurrence of a Trigger Event, each outstanding Debenture of this Issue will be converted, on a full and permanent basis
We advise you to read the content of the Prospectus carefully prior to investment.
This investment instrument is riskier than a bank deposit.
These Debentures are complex products and have provision for loss absorption in the form of Non-Viability Conversion as set out in the Prospectus. This means that following the occurrence of a Trigger Event as may be determined by the Central Bank of Sri Lanka, the Bank will convert the Debentures into ordinary voting shares. A Qualified Investor will be deemed paid in full the principal plus accrued and unpaid interest due on the Debentures, upon such conversion. The number and value of ordinary voting shares to be received on a Non-Viability Conversion may be worth significantly less than the Par Value of the Debentures and can be variable.
Please refer to the "Risk Factors Section" of the Prospectus for further details.
Each potential Qualified Investor in these Debentures must determine the suitability of investment in light of its own circumstances. In particular, each potential Qualified Investor may wish to consider, either on its own or with the help of its financial and other professional advisers, whether the Qualified Investor:
- Has sufficient knowledge and experience to make a meaningful evaluation of these Debentures, the merits and risks of investing in the Debentures and the information contained or incorporated by reference in this Prospectus;
- Has access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in these Debentures and the impact the Debentures will have on its overall investment portfolio;
- Has sufficient financial resources and liquidity to bear all of the risks of an investment in these Debentures;
- Understands thoroughly the terms of these Debentures, including the provisions relating to the Non- Viability Conversion of the Debentures, and is familiar with the behavior of financial markets; and
- Is able to evaluate possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks.
A potential investor should not invest in these Debentures unless the Qualified Investor has the expertise (either alone or with its financial and other professional advisors) to evaluate how the Debentures will perform under changing conditions, the resulting effects on the value of the Debentures and the impact this investment will have on the potential Qualified Investor's overall investment portfolio.
ii | National Development Bank PLC - Debenture Issue 2024
This Prospectus is dated 21st November 2024
Responsibility for the Content of the Prospectus
This Prospectus has been prepared with available information.
The Directors of National Development Bank PLC (the Bank or the Issuer) have seen and approved this Prospectus and collectively and individually, accept full responsibility for the accuracy of the information given and confirm that after making all reasonable inquiries and to the best of their knowledge and belief, the information contained herein is true and correct in all material respects and that there are no other material facts, the omission of which would make any statement herein misleading or inaccurate. Where representations regarding the future performance of the Bank have been given in this Prospectus, such representations have been made after due and careful enquiry of the information available to the Bank and making assumptions that are considered to be reasonable at the present point in time in its best judgment.
The Bank accepts responsibility for the information contained in this Prospectus. While the Bank has taken reasonable care to ensure full and fair disclosure of pertinent information, it does not assume responsibility for any investment decisions made by the Qualified Investors based on the information contained herein. In making such investment decisions, prospective Qualified Investors are advised to read the Prospectus and rely on their own examination and assessment of the Bank and the terms of the Debentures issued including the risks associated.
FOR ENQUIRIES PLEASE CONTACT MANAGERS AND PLACEMENT AGENTS TO THE ISSUE
The Colombo Stock Exchange (CSE) has taken reasonable care to ensure full and fair disclosure of information in this Prospectus. However, CSE assumes no responsibility for accuracy of the statements made, opinions expressed or reports included in this Prospectus. Moreover, the CSE does not regulate the pricing of Debentures which is decided solely by the Issuer.
Registration of the Prospectus
A copy of the Prospectus has been delivered to the Registrar of Companies for registration in compliance with the provisions of Section 40 of the Companies Act No.7 of 2007. The following are the documents attached to the copy of the Prospectus delivered to the Registrar of Companies for registration pursuant to Section 40(1) of the Companies Act.
- The written consent of the Auditors and Reporting Accountants for the inclusion of their name in the Prospectus as Auditors and Reporting Accountants to the Issue and to the Bank.
- The written consent of the Rating Agency for the inclusion of their name in the Prospectus as Rating Agency to the Issue and to the Bank.
- The written consent of the Trustee to the Issue for the inclusion of their name in the Prospectus as Trustee to the Issue.
- The written consent of the Bankers to the Issue for the inclusion of their name in the Prospectus as Bankers to the Issue.
- The written consent of the Company Secretary of the Bank for the inclusion of the name in the Prospectus as Company Secretary to the Bank.
- The written consent of the Registrars to the Issue for the inclusion of their name in the Prospectus as Registrars to the Issue.
- The written consent of the Lawyers to the Issue for the inclusion of their name in the Prospectus as Lawyers to the Issue.
- The written consent of the Managers and Placement Agents to the Issue for the inclusion of their names in the Prospectus as Managers and Placement Agents to the Issue.
National Development Bank PLC - Debenture Issue 2024 | iii
- The declaration made and subscribed to, by each of the Directors of the Bank herein named as a Director, jointly and severally confirming that each of them have read the provisions of the Companies Act and the CSE Listing Rules relating to the Issue of the Prospectus and that those provisions have been complied with.
The said Auditors and Reporting Accountants to the Issue and to the Bank, Trustee to the Issue, Bankers to the Issue, Company Secretary, Managers and Placement Agents to the Issue, Registrars to the Issue, Lawyers to the Issue, Rating Agency have not, before the delivery of a copy of the Prospectus for registration with the Registrar of Companies in Sri Lanka withdrawn such consent.
Registration of the Prospectus in Jurisdictions Outside of Sri Lanka
This Prospectus has not been registered with any authority outside of Sri Lanka. Non-Resident investors may be affected by the laws of the jurisdiction of their residence. Such investors are responsible to comply with the laws relevant to the country of residence and the laws of Sri Lanka, when making the investment.
Representation
The Debentures are issued solely on the basis of the information contained and representations made in this Prospectus. No dealer, sales person, individual or any other outside party has been authorized to give any information or to make any representation in this connection with the Issue other than the information and representations contained in this Prospectus and if given or made such information or representations must not be relied upon as having been authorized by the Bank.
Forward Looking Statements
Any Statements included in this Prospectus that are not statements of historical fact constitute "Forward Looking Statements". These can be identified by the use of forward looking terms such as "expect", "anticipate", "intend", "may", "plan to", "believe", "could" and similar terms or variations of such terms. However, these words are not the exclusive means of identifying Forward Looking Statements. As such, all or any statements pertaining to expected financial position, business strategy, plans and prospects of the Bank are classified as Forward Looking Statements.
Such Forward Looking Statements involve known and unknown risks, uncertainties and other factors including but not limited to regulatory changes in the sectors in which the Bank operates and its ability to respond to them, the Bank's ability to successfully adapt to technological changes, exposure to market risks, general economic and fiscal policies of Sri Lanka, inflationary pressures, interest rate volatilities, the performance of financial markets both globally and locally, changes in domestic and foreign laws, regulation of taxes and changes in competition in the industry and further uncertainties that may or may not be in the control of the Bank.
Such factors may cause actual results, performance and achievements to materially differ from any future results, performance or achievements expressed or implied by Forward Looking Statements herein. Forward Looking Statements are also based on numerous assumptions regarding the Bank's present and future business strategies and the environment in which the Bank will operate in the future.
Given the risk and uncertainties that may cause the Bank's actual future results, performance or achievements to materially differ from that expected, expressed or implied by Forward Looking statements in this Prospectus, Qualified Investors are advised not to place sole reliance on such statements.
Presentation of Currency Information and Other Numerical Data
The financial statements of the Bank and currency values of economic data or industry data in a local context will be expressed in Sri Lanka Rupees. References in the Prospectus to "LKR", "Rupees" or "Rs." is the lawful currency of Sri Lanka. Certain numerical figures in the Prospectus have been subject to rounding adjustments, accordingly numerical figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them. All numerical figures given under Section 7.0 of the Prospectus are audited figures unless otherwise stated.
iv | National Development Bank PLC - Debenture Issue 2024
IMPORTANT
All Qualified Investors should indicate in the Application for Debentures, their Central Depository Systems (Private) Limited (CDS) account number.
In the event the name, address or NIC number/passport number/company number of the Qualified Investor mentioned in the Application Form differs from the name, address or NIC number/passport number/company number as per the CDS records, the name, address or NIC number/ passport number/company number as per the CDS records will prevail and be considered as the name, address or NIC number/passport number/company number of such Qualified Investor. Therefore, Qualified Investors are advised to ensure that the name, address or NIC number/passport number/company number mentioned in the Application Form tally with the name, address or NIC number/passport number/company number given in the CDS account as mentioned in the Application Form.
As per the directive of the Securities and Exchange Commission made under Circular No.08/2010 dated 22nd November 2010 and Circular No.13/2010 issued by the CDS dated 30th November 2010, all Debentures are required to be directly deposited into the CDS. To facilitate compliance with this directive, all Qualified Investors are required to indicate their CDS account number.
In line with this directive, THE DEBENTURES ALLOTTED TO A QUALIFIED INVESTOR WILL BE DIRECTLY DEPOSITED IN THE CDS ACCOUNT OF SUCH QUALIFIED INVESTOR, the details of which is indicated in their Application Form. If the CDS account number indicated in the Application Form is found to be inaccurate /incorrect or there is no CDS number indicated, the Application will be rejected, and no allotments will be made. The Bank may require a Qualified Investor to provide such documentation as is reasonably necessary to satisfy itself that the investor is a Qualified Investor.
PLEASE NOTE THAT DEBENTURE CERTIFICATES WILL NOT BE ISSUED.
Qualified Investors who wish to open a CDS account, may do so through a Trading Participants of the CSE as set out in Annexure II or through any Custodian Bank as set out in Annexure III of this Prospectus.
National Development Bank PLC - Debenture Issue 2024 | v
ISSUE AT A GLANCE | |
Issuer | National Development Bank PLC |
Instrument | BASEL III compliant - Tier 2, Listed, Rated, Unsecured, Subordinated, Redeemable |
Debentures with a Non-Viability Conversion. | |
Listing | The Debentures will be listed on the Colombo Stock Exchange |
Number of Debentures | An Issue Upto of Fifty Million (50,000,000) Basel III compliant - Tier 2, Listed, |
to be Issued | Rated, Unsecured, Subordinated, Redeemable Debentures with a Non-Viability |
Conversion. | |
Amount to be Raised | A sum of up to Sri Lanka Rupees Five Billion (LKR 5,000,000,000/-). |
Entity Rating | A- (lka)/ Stable by Fitch Ratings Lanka Limited |
Issue Rating | BBB (lka) by Fitch Ratings Lanka Limited |
Issue Price | Rupees One Hundred (LKR 100/-) per each Debenture |
Par Value | Rupees One Hundred (LKR 100/-) per each Debenture |
Details of Debentures | Basel III compliant - Tier 2, Listed, Rated, Unsecured, Subordinated, Redeemable |
Debentures with a Non-Viability Conversion, as described below; |
Debenture | Type of | Interest | Annual | Interest | ||
Tenure | Rate | Effective | Payment | |||
Type | Interest | |||||
(per annum) | Rate (AER) | Frequency | ||||
Type A | Fixed | 5 years | 13.00% p.a. | 13.00% | Annually | |
Rate | ||||||
Type B | Fixed | 5 years | 12.41% p.a. | 13.00% | Quarterly | |
Rate | ||||||
Number of Debentures | The minimum | subscription requirement applicable | for a Qualified Investor | |||
to be Subscribed | applying for Debentures shall be Rupees Ten Thousand (LKR 10,000/-). | |||||
Provided however, the minimum subscription requirement applicable for an | ||||||
individual Investor applying for BASEL III Compliant Debt Securities as per Rule | ||||||
2.1.1.n of CSE Listing Rules shall be Rupees Five Million (LKR 5,000,000/-). | ||||||
Any Application in excess of the minimum subscription requirement shall be in | ||||||
multiples of Rupees Ten Thousand (LKR 10,000/-). | ||||||
Interest Payment | For Type A Debentures: The dates on which payments of interest in respect of the | |||||
Date(s) | Type A Debentures shall fall due, which shall be twelve (12) months from the Date | |||||
of Allotment and every twelve (12) months therefrom from the Date of Allotment | ||||||
until the Date of Redemption and includes the Date of Redemption. |
For Type B Debentures: The dates on which payments of interest in respect of the Type B Debentures shall fall due, which shall be three (03) months from the Date of Allotment and every three (03) months therefrom from the Date of Allotment until the Date of Redemption and includes the Date of Redemption.
Interest would be paid not later than three (03) Working Days from each Interest
Payment Date. The final interest payment will be paid together with the Principal
Sum within three (03) Working Days from the Date of Redemption.
vi | National Development Bank PLC - Debenture Issue 2024
Interest Period | For Type A Debentures: The twelve (12) month period from an Interest Payment |
Date and ending on the date immediately preceding the next Interest Payment | |
Date (inclusive of the aforementioned commencement date and end date) and | |
shall include the period commencing from the Date of Allotment and ending on | |
the date immediately preceding the first Interest Payment Date (inclusive of the | |
aforementioned commencement date and end date) and the period from the last | |
Interest Payment Date before the Date of Redemption and ending on the date | |
immediately preceding the Date of Redemption (inclusive of the aforementioned | |
commencement date and end date). | |
For Type B Debentures: The three (03) month period from an Interest Payment | |
Date and ending on the date immediately preceding the next Interest Payment | |
Date (inclusive of the aforementioned commencement date and end date) and | |
shall include the period commencing from the Date of Allotment and ending on | |
the date immediately preceding the first Interest Payment Date (inclusive of the | |
aforementioned commencement date and end date) and the period from the last | |
Interest Payment Date before the Date of Redemption and ending on the date | |
immediately preceding the Date of Redemption (inclusive of the aforementioned | |
commencement date and end date). | |
Mode of Payment of | Through an electronic fund transfer mechanism recognized by the banking system |
Principal Sum and | of Sri Lanka such as SLIPS and RTGS where accurate bank account details are |
Interest | provided by the Debenture Holders subject to the prevalent limitation with regard |
to SLIPS and RTGS or by cheque marked "Account Payee Only". | |
Issue Opening Date | 26th November 2024 |
Date of Allotment | The date on which the Debentures will be allotted by the Bank to Applicants |
subscribing thereto. | |
Closure Date of the | Subject to the provisions contained below, the subscription list for the Debentures |
Subscription List | will open at 9.30 a.m. on 26th November 2024 and will remain open for fourteen |
(14) Market Days including the Issue opening date until closure at 4.30 p.m. on | |
13th December 2024. | |
However, the subscription list will be closed on an earlier date at 4.30 p.m. with | |
notification to the CSE on the maximum of Fifty Million (50,000,000) Debentures | |
being fully subscribed. | |
In the event the Board of Directors of the Bank decides to close the Debenture | |
Issue without the full subscription of the Fifty Million (50,000,000) Debentures, | |
such decision is to be notified to the CSE on the day such decision is made and the | |
subscription list will be closed on the following Market Day at 4.30 | |
pm. (refer Section 5.2 of this Prospectus). |
National Development Bank PLC - Debenture Issue 2024 | vii
Basis of Allotment | In the event of an over subscription, the Board of Directors of the Bank has |
appointed authorized personnel to decide the basis of allotment of the | |
Debentures in a fair manner within seven (07) Market days from the closure of the | |
Issue. | |
The Board however shall reserve the right to allocate up to a maximum of 75% | |
of the Number of Debentures to be allotted under this Prospectus on a | |
preferential basis, to identified institutional investor/s of strategic importance | |
with whom the Bank might have mutually beneficial relationships in the future | |
as future investors, who are Qualified Investors. | |
Number of Debentures to be allotted to identified institutional investor/s of | |
strategic and operational importance, on a preferential basis or otherwise will not | |
exceed 75% of the total number of Debentures to be issued under this Prospectus | |
under any circumstances, unless there is an under subscription from the other | |
investors (investors that do not fall under preferential category). | |
Non-Viability | In the event of an occurrence of a Trigger Event as determined at the sole |
Conversion | discretion of the Central Bank of Sri Lanka, there would be a conversion of |
Debentures to ordinary voting shares by the Bank without any requirement of | |
approval by the Debenture Holders, in compliance with BASEL III requirements. | |
Upon the occurrence of a Trigger Event, the outstanding balance of the | |
Debentures including the total Par Value of the Debentures and the debenture | |
interest accrued and unpaid as at that date will be permanently converted to | |
ordinary voting shares at the Conversion Price. In the event of any Debenture | |
Holder being entitled to a fractional allotment of an ordinary voting share on such | |
issuance and allotment, the Bank shall settle such sums in cash, based on the issue | |
price of such share. | |
Conversion Price | The price based on the simple average of the daily Volume Weighted Average |
Price (VWAP) of an ordinary voting share during the three months (03) period, | |
immediately preceding the date of the Trigger Event. | |
Volume Weighted | The daily Volume Weighted Average Price (VWAP) of an ordinary voting share as |
Average Price (VWAP) | published by the Colombo Stock Exchange. |
Trigger Event | Means a point or event at which the Monetary Board of the Central Bank of |
Sri Lanka in terms of item 10 (iii)(a) of Web Based Return Code 20.2.3.1.1.1 of the | |
Banking Act Direction No. 1 of 2016 dated 29th December 2016 (as may be | |
amended from time to time) determines: |
- the Bank would become non-viable, without a write-down in terms of item 10(iii)(a) of the Web Based Return Code 20.2.3.1.1.1 of the said Directions; or
- to make a public sector injection of capital, or equivalent support, without which the Bank would have become non-viable in terms of item 10(iii)(b) of the said Directions.
- | National Development Bank PLC - Debenture Issue 2024
TABLE OF CONTENTS | ||
1 | CORPORATE INFORMATION | 1 |
2 | RELEVANT PARTIES TO THE ISSUE | 2 |
3 | LIST OF ABBREVIATIONS | 3 |
4 | GLOSSARY OF TERMS RELATED TO THE ISSUE | 4 |
5 | PRINCIPAL FEATURES OF THE DEBENTURES | 8 |
5.1 | INVITATION TO SUBSCRIBE | 8 |
5.2 | SUBSCRIPTION LIST | 8 |
5.3 | TYPES OF DEBENTURES | 9 |
5.4 OBJECTIVES OF THE ISSUE & SPECIFIC RISK RELATING TO THE OBJECTIVES OF THE DEBENTURE
ISSUE | 9 | |
5.5 | PAYMENT OF INTEREST | 12 |
5.6 | APPLICATION OF TAX ON INTEREST PAYMENTS | 13 |
5.7 | REDEMPTION OF DEBENTURES AND CONSEQUENCE OF A TRIGGER EVENT | 13 |
5.8 | PAYMENT METHOD | 15 |
5.9 | TRUSTEE TO THE ISSUE | 15 |
5.10 | RATING OF THE DEBENTURE | 16 |
5.11 | RIGHTS AND OBLIGATIONS OF THE DEBENTURE HOLDERS | 16 |
5.12 | BENEFITS OF INVESTING IN DEBENTURES OFFERED BY THE BANK | 17 |
5.13 | RISKS INVOLVED IN INVESTING IN THE DEBENTURES | 17 |
5.14 | TRANSFER OF DEBENTURES | 22 |
5.15 | LISTING | 22 |
5.16 | COST OF THE ISSUE | 22 |
5.17 | BROKERAGE FEE | 23 |
5.18 | UNDERWRITING | 23 |
5.19 | INSPECTION OF DOCUMENTS | 23 |
6 | PROCEDURE FOR APPLICATION | 24 |
6.1 | ELIGIBLE APPLICANTS | 24 |
6.2 | HOW TO APPLY | 24 |
6.3 | NUMBER OF DEBENTURES TO BE SUBSCRIBED | 28 |
6.4 | MODE OF PAYMENT OF THE INVESTMENT BY THE APPLICANTS | 28 |
6.5 | REJECTION OF APPLICATIONS | 30 |
6.6 | BANKING OF PAYMENTS | 31 |
6.7 | BASIS OF ALLOTMENT OF DEBENTURES | 31 |
6.8 | REFUNDS | 31 |
6.9 | CDS ACCOUNTS AND SECONDARY MARKET TRADING | 32 |
7 | THE BANK | 33 |
7.1 | OVERVIEW | 33 |
7.2 | FINANCIAL YEAR | 33 |
7.3 | STATED CAPITAL | 33 |
7.4 | MAJOR SHAREHOLDERS AS AT 30TH SEPTEMBER 2024 | 34 |
7.5 | DETAILS OF OTHER DEBENTURES IN ISSUE | 35 |
7.6 | PARTICULARS OF LONG TERM LOANS AND OTHER BORROWINGS OF THE BANK | 37 |
7.7 | CONTINGENT LIABILITIES AND LITIGATION AGAINST THE BANK | 38 |
7.8 | LITIGATIONS AGAINST THE BANK | 38 |
7.9 | KEY FINANCIAL RATIOS | 39 |
National Development Bank PLC - Debenture Issue 2024 | ix |
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