Uco plans Rs 500 cr tier II bond float

Kolkata-based Uco Bank is planning to hit the market with its second upper tier II bond issue by next week to shore up its capital base.

The size of issue is Rs 500 crore. Earlier, it had raised Rs 300 crore through upper tier-II bond in 2005-06.

The public sector bank is firming up the coupon rate for the proposed bond offering. Rating agency Crisil has assigned AA/stable rating to the hybrid capital instrument, executive director S A Bhat said.

It has also raised about Rs 450 crore in two tranches through the tier I perpetual debt, another hybrid capital instrument permitted by Reserve Bank of India.

About the follow-on equity issue in the current fiscal, Bhat said the bank was assessing conditions and requirements and in the mean time, it will float subordinated bond issue (tier II) to meet capital requirements.

Funds raised through bonds offering would be able to support business growth in 2006-07 and there is no compulsion to float equity issue immediately, he said.

The ratings on Uco Bank's debt instruments continue to reflect the benefits of majority ownership by the Government of India (GoI). They also reflect the bank's adequate liquidity position and resource profile.

However, these strengths are tempered by the bank's modest Tier I capital adequacy ratio, and average earnings profile and asset quality, Crisil said.

Uco Bank's tier I capital adequacy, as a proportion of its risk-weighted assets, has improved to 6.1 per cent as on March 31, 2006 from 5.75 per cent as on March 31, 2005. Bank has policy of maintaining its overall capital adequacy ratio above 11 per cent.