Canara Bank to raise about $300 mn via overseas bonds

Public sector lender Canara Bank plans to raise about $300 million through bonds under Medium Term Notes (MTNs) mostly for refinancing business and buffer to repay bonds maturing in near future.

Banking sources said this is follow-on fundraising after it raised $400 million in August. The size and pricing for the tap bond issuance is yet to be finalised and would depend on market response.  

Rating agency Moody's in a statement said Canara Bank's proposed senior unsecured tap bond issuance under $2 billion MTN program is being carried out from its London branch.

The issuance has no impact on Canara Bank, London Branch's Baa3 foreign currency senior unsecured debt rating. The outlook on the ratings, where applicable, is stable, Moody’s said.

The tap bond issuance follows from the bank's $400 million with coupon of 3.25 per cent notes which was earlier issued on 10 August 2017. The bonds will be listed on the Singapore Exchange (SGX-ST).

The Baa3 rating is anchored on Canara Bank's ba3 baseline credit assessment (BCA) and Moody's assessment of the likelihood of a very high level of support from the government (Baa3 positive) in a stressed situation.

Bengaluru-based bank reported standalone assets of Rs 5.7 trillion (approximately $89.7 billion) as at end of June 2017.

Canara Bank's BCA of ba3 is underpinned by its weak asset quality. While its gross nonperforming loan (NPL) ratio is somewhat better than its domestic peers, it is significantly weaker compared to its ba3 global peers, with a trend of increasing NPLs.

Furthermore, provisioning levels and capital buffers are lower compared with similarly rated peers. On balance, its ratings also account for its adequate liquidity position and funding profile, and sound deposit franchise.