Latest bond issue mirrors investor confidence: CB

8 January 2014 03:34 am Views - 9358

The relatively low rate at which Sri Lanka sold its latest US $ 1 billion bond issue reflects the confidence international investors have placed in the sovereign bond issuances of Sri Lanka, the Central Bank said yesterday.

The Central Bank on behalf of the Sri Lankan government successfully l aunched and priced a US $ 1 billion 5-year tenor sovereign bond at a yield of 6 percent per annum. The Issue was announced during the Asia morning on January 6 with an initial price guidance of 6.25 percent.

“In the backdrop of a quasisovereign (state-controlled National Savings Bank) going to the international markets a few months ago and borrowing at over 9 percent, this is quite commendable,” an analyst commented.

Meanwhile, Sri Lanka’s previous five-year issuances in 2007 and 2009 (US $ 500mn each) were priced at yields of 8.25 percent and 7.40 percent respectively

“Driven by the support from existing and new investors, Sri Lanka succeeded in achieving a five-year cost of funds which is progressively lower compared to the previous issuances.

This achievement is all the more impressive, given the rising benchmark US Treasury yield and also the high volatility seen in global capital markets in recent months,” the Central Bank said in a statement.

The final order books of the issue stood at US$ 3.2 billion, an oversubscription ratio of 3.2 times, from 200 accounts, achieved within an eighteen hour book-build period.

The US investors bought 62 percent of the bonds, with European and Asian investors buying 26 percent and 12 percent respectively.

“Global Fund Managers were the largest investors in the transaction, representing 89 percent, with govt. and private banks taking 8 percent and 3 percent respectively,” the Central Bank said.

Fitch Ratings, Moody’s Investors Service and Standard and Poor’s have rated the Issue at ‘BB-’, ‘B1’ and ‘B+’, respectively.

The Hong Kong and Shanghai Banking Corporation Limited, Standard Chartered Bank and UBS acted as Joint Lead Managers/Bookrunners to the transaction.

During the post announcement of the transaction, Sri Lanka conducted a series of fixed income investor updates through internet-based presentations and conference calls covering Asia, Middle-East, Europe and the USA.